Does distribution matter? A contribution to the discussion on the effects of the concentration of income distribution on state activities and its underlying values

In this paper consequences of a rising income inequality for state activities and the role of economic policy are discussed. Using a simple model it is shown that an increasing income inequality leads to a higher government's share of GDP though the state does not take over more responsibilitie...

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Bibliographic Details
Published inJahrbuch für Wirtschaftswissenschaften Vol. 59; no. 2; pp. 141 - 148
Main Author Neubäumer, Renate
Format Journal Article
LanguageGerman
Published 01.01.2008
Subjects
Economic policy
Gross domestic product
Income distribution
Income inequality
Income redistribution
Public goods
State
Taxation
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Summary:In this paper consequences of a rising income inequality for state activities and the role of economic policy are discussed. Using a simple model it is shown that an increasing income inequality leads to a higher government's share of GDP though the state does not take over more responsibilities, and a higher tax share though rates of taxation are not increased. That forces economic politicians to act. If they want to prevent an increase of the tax share, transfer share and / or government's share of GDP, they must move away from socially accepted value judgments upon social standards, the degree of redistribution by taxes and / or an adequate supply with public good. Reprinted by permission of Vandenhoeck & Ruprecht
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ISSN:0948-5139