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Article: GOVERNMENT TRANSFERS AND INEQUALITY: AN ANATOMY OF POLITICAL FAILURE
- Article from:
- Public Finance and Management
- Article date:
- April 1, 2008
- Author:
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Copyright informationCopyright Southern Public Administration Education Foundation 2008. Provided by ProQuest LLC. (Hide copyright information)
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ABSTRACT
Governments have long justified transfer payments in the name of reducing income inequality. The justification seems plausible and compassionate, if one takes an idealistic view of public and private incentives. Political authorities can simply take money from the wealthy with a progressive tax structure and use much of it to make net transfers to the poor, who would otherwise lead impoverished lives. Initially, this may actually seem to reduce income inequality and increase the incomes of the poor. However, political transfers soon begin motivating public and private responses that offset any equalizing effect the transfers may have upon income, and increase economic inefficiency. ...
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