Is the income redistribution an obstacle or a factor of the economic efficiency ?

Thèmes abordés

Income, Redistribution, Economic efficiency

Résumé du document

Choosing the perspective of supply, the current liberal opinion sees in the redistribution process a loss of efficiency. The State handouts (business subsidies, social benefits) and the increasing drain make the natural laws of society degraded, I mean the mechanism of sanction/reward. Choosing the perspective of demand, Keynes considers the reduction of inequalities as a growth factor : the proportion of consumption is lower in high-incomes, any redistribution reducing their shares in the wealth supports the demand and then decreases the savings.The pitfall of the "social" solution is the risk of loss of efficiency resulting from excessive protection of the least dynamic people; the liberal solution is an injustice against left behind. So this raises the question of the existence of a contradiction or complementarity between redistribution and economic efficiency.

In this research paper , I will try to answer to this question. In a first part, I will introduce what redistribution means and will break in the different main redistribution models. Then I will explain in details the two thinking's already introduced at the beginning. At the end I will take for proof the history to explain in reality what happens when a state uses a social redistribution or a "Keynesian" redistribution. And for sure, all along this paper, I will argue whether or not these types of redistribution are an obstacle or a factor of the economic efficiency. France is taken as the main example all along this paper. Some of the references are therefore in French language.

Extraits

[...] We can see that the last two are not the most interventionist. According to Thomas Picketty, the share of the top decile in total income has decreased from 47% in 1913 to 30% in 198313. The observation therefore confirms the Keynesian argument saying that growth is favored by the reduction of inequalities and the continued ability of consumption affected by “social risks”. This helps to cushion the 1970's recession by keeping an increasing salarial income despite the slowing growth. B. [...]

[...] The goal is to complete the payment of pension by distribution. However, this return to a welfare state is realized in a new context, indeed this is the sole method that does not compete employment since the condition to be helped is precisely to work. We can take the example of the AFDC (Aid to families with Dependent Children), that have had been implemented in the United State between 1935 and 1996, considered as encouraging laziness, is reduced. Unemployed people move from a “welfare” to a “workfare” system, they have to do public works in exchange for benefits, and the offenders are subject to an intensified repression of the population behind bars). [...]

[...] On the other hand, welfare payments have a strong redistributive effect, mainly due to pensions and tax credits. The difference on primary incomes between the first and the 10th decile is about 23,5 times before transfers and 10,2 times after.5 C. Three main models of Welfare State We can compare each national system of social protection of the three models according to the typology proposed by Esping-Andersen in “The Three Worlds of Welfare Capitalism”6: - Germany, largely imitated by France, applies the Bismarckian insurance principe created in 1880. [...]

[...] In other words, this curve says that a tax increase leads to a decline in state revenues because over taxed workers would be encouraged to work less (it is no longer worth working if incomes are too low). There is therefore a threshold beyond which the workers reduce their work or would hide away in order to pay less taxes. III. The Empirical evidence cannot decide A. The extension of welfare state matches with the Fordist period Since the 1930s, the rise of the government state has not stopped. [...]

[...] The system is completed by the audience: medicaid, medicare and welfare, that is to say allocations to less incomes, and tax benefits to the poor working people (Earned Income Tax Credit). Behind this reluctance to a complete system of protection, one can easily discerns the traditional liberal reasoning that puts efficiency on the market and considered public intervention as undesirable. The huge growth of redistributive systems raises the question of their impact on economic growth. The debate was lively, it opposes two main theses: for Keynesian, welfare state is an efficiency factor while for the Liberals, it is the main obstacle. II. [...]