Question

In: Economics

Describe one redistributive policy that would reduce economic inequality.

 

  • Describe one redistributive policy that would reduce economic inequality.  Explain how it would reduce economic inequality, and explain why it is categorized as a redistributive policy, not a predistributive policy.
  • Describe one predistributive policy that would reduce economic inequality.  Explain how it would reduce economic inequality, and explain why it is categorized as a predistributive policy, not a redistributive policy
  • Which of these two policies do you think would be more effective at reducing income inequality? Explain why you think this policy would be more effective. Be sure to discuss the differences between redistributive and predistributive policies in your explanation. There is no right or wrong answer for this part, you will just be graded on how well you can explain and justify your decision.

Solutions

Expert Solution

REDISTRIBUTION POLICY

Redistribution means taking income from those with higher incomes and providing income to those with lower incomes.

. In advanced economies, the apparent impact of globalization and technological change and the cost of counteracting these forces is raising concern. In developing economies, where inequality is higher, the issue is whether it poses a major obstacle to raising growth and reducing poverty. In both cases, the redistribution of income might achieve not only greater equality but also faster growth and, for developing economies, faster poverty reduction.

In countries where growth is satisfactory but benefits the poor much less than the non-poor, there obviously is a strong case for shifting resources from those at the top of the income scale to those at the bottom. Giving poor children access to better education and paying for it by taxing the affluent is one way to reduce inequality while also fostering future growth and poverty reduction. Redistributive policies could also help narrow the gap between rich and poor in countries with high inequality, where social and political tensions or the rise of populist regimes might prove bad for growth in the long run.

Knowing that a more equal distribution of resources may be good for development is one thing; having the right instruments to implement it is another. These instruments—from progressive taxation, cash transfers, and investment in human capital to regulation and inclusive growth strategies—do exist. But they are vastly underused in developing economies.The programs are paid for through the federal income tax, which is a progressive tax system.

PREDISTRIBUTIVE POLICY

Predistributive policies to reduce inequalities
In any modern economy, government has the role of setting and enforcing market
rules – establishing everything from property and contract rights protections, to fair
competition, bankruptcy rules, stock exchange regulations, justice systems, interest
rates, corporate governance regulations, and labor protections. Together, these
laws, regulations and public policies literally create the market, as without them
business would be impossible. Each of these interventions has its own distributive
consequences. They precondition which economic actors benefit and how. Three
areas of predistributive policies are particularly relevant from the perspective of a
human rights approach to meeting the commitments of SDG10: labor protections,
care and family leave policies, and financial regulation.

Conclusion:

According to the policies to reduce the income inequality the REDISTRIBUTION policy plays a vital role to reduce and decrease .If a society decides to reduce the level of economic inequality, it has three main sets of tools: redistribution from those with high incomes to those with low incomes; trying to assure that a ladder of opportunity is widely available; and a tax on inheritance.


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