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Economics > Redistribute income and wealth - Policies > Flashcards

Redistribute income and wealth - Policies Flashcards

1
Q

How are income and wealth related

A

They are mutually reinforcing concepts

With high income expect high wealth

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2
Q

What type of judgement is government intervention

A

A normative judgement based on equity

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3
Q

Taxation

A

Increase progressive tax or decrease regressive tax

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4
Q

Increasing progressive tax: advantages

A

Raising tax on those earning in highest income bracket = tax revenue

Raise income tax free allowance in lowest income brackets = poor keeping more of their income

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5
Q

Decreasing regressive tax: advantages

A

Increases value of income for poor

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6
Q

Examples of regressive tax

A

VAT
demerit goods: alcohol
cigarette tax
fuel tax

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7
Q

Who suffers the burden more from regressive taxes?

A

The poor

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8
Q

Increasing progressive tax: disadvantages

A

The rich are disincentivised to earn more, because have knowledge that most of their income will be taxed away (laffee curve)

Distorts incentives = reduction in tax revenue

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9
Q

Decreasing regressive tax: disadvantages

A

Hits government finances as regressive tax contributes a lot.
Austerity policies may go forward to help control government budgets

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10
Q

Universal benefits

A

Available to all

Don’t get taken away under any circumstances

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11
Q

Example of universal benefits

A

Child benefits

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12
Q

Means tested benefits

A

Benefits to those who desperately need it

Taken away when incomes reach certain threshold

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13
Q

Example of means tested benefit

A

Unemployment benefit

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14
Q

Disadvantage to mean tested benefit

A

Poverty trap
Aware benefits taken away when income reaches certain threshold
Incentive to stay on benefits and not find work
= greatest strain on public finances and inefficient outcomes

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15
Q

Disadvantages to universal benefits

A

The more universal benefited implemented, the more the government needs to spend
=Greater fiscal impact
=Future issues - austerity policy needed?

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16
Q

Advantages of minimum wages

A

More people can access better living standards

17
Q

Minimum wages

A

Set above competitive outcomes to help those on lower wages

An artificial boost to the wage rate

18
Q

Inplementing maximum wages means…

A

Capping bonuses

19
Q

Disadvantage to implementing maximum wage

A

Less incentive to be entrepreneurial and productive if wage can’t increase beyond a certain level

20
Q

Disadvantage for minimum wage implemented

A

Youth unemployment rises

21
Q

Legislation that can be imposed

A

Anti-discrimination - helps decrease wage differentials
Hiring/firing - Makes it harder for firms to make workers redundant decreasing unequal distribution of income and wealth
Minimum wage
paternity leave

22
Q

Disadvantages of legislation

A

Cost to businesses
enforcement
Government failure

23
Q

Enforcement

A

Needs to be strong to make an impact

24
Q

Legislation: Government failure

A

Businesses may shut down because of how costly the legislations are
May relocate to other countries where legislation isn’t as strict

Unintended consequences: cost of intervention outweighs the benefits of intervention

25
Q

Supply-side policies

A

Government spending on education/training

Government spending on healthcare

26
Q

Government spending on education/training advantages

A

Increase skills = increase MRP = increase productivity = rise in incomes and wages

27
Q

Government spending on healthcare advantages

A

If sick, treated easily = less sick days = maintain productivity

28
Q

Advantages to implementing supply-side policies

A

Tackling root cause of unequal distribution of income and wealth
Long-term situations improve

29
Q

Disadvantages to supply-side policies

A

Government finances

time-consuming

30
Q

Evaluation: incentives

A

Perverse incentives policies may promote

31
Q

Evaluation: government finances

A

Can the government afford them?

32
Q

Evaluation: equity vs efficiency

A

Distortion of incentives = inefficient in terms of end outcomes
Min/max wages = Distortion of significant labour market outcomes

33
Q

Evaluation: normative judgement

A

Risk of inefficiency greater, as an opinion

Intention to make things better, may be made worse = gov failure

34
Q

Evaluation: is inequality always bad?

A

Is level of inequality acceptable for what capitalist economies bring?
Risk of government failure outweighs benefits

Economics (9 decks)

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