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An income equalisation policy and social welfare: beyond inequality

Author

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  • Hiroaki Teramoto

    (Hiroshima Shudo University)

Abstract

The inequality of income distribution is one of the most serious problems to our society. Traditional economics proposes the tax increase on wealthy classes and transfers its revenue to low income group. This is the most appropriate one. But, the total of this and donation will unfortunately be insufficient. For procuring funds to ease inequality, I propose to erase the government bonds which are already purchased and owned by the central bank. The government, then, issues new government bonds (the total sum of which should be less than erased one) to expend for equalization. The amount of new government bonds is determined from the maximisation of social welfare function concerning to income distribution. By this policy, first, the socially optimal equalization will be attained; second, through the productivity increase caused by the expenditure for low income group, the national economy will grow; third, because of the erasure process, the government bonds outstanding will not increase. In these days of pandemic, much more government expenditures are needed and thereby government deficits are piled up. I think the valid policy is not the heavy tax increase, but the execution of erasure of government bonds outstanding and to equalize income distribution.

Suggested Citation

  • Hiroaki Teramoto, 2023. "An income equalisation policy and social welfare: beyond inequality," SN Business & Economics, Springer, vol. 3(1), pages 1-38, January.
    • Handle: RePEc:spr:snbeco:v:3:y:2023:i:1:d:10.1007_s43546-022-00331-1
    DOI: 10.1007/s43546-022-00331-1
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    References listed on IDEAS

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    1. Thomas Piketty & Emmanuel Saez, 2003. "Income Inequality in the United States, 1913–1998," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 118(1), pages 1-41.
    2. Ravallion, Martin, 2016. "The Economics of Poverty: History, Measurement, and Policy," OUP Catalogue, Oxford University Press, number 9780190212773.
    3. Sen, Amartya, 1973. "On Economic Inequality," OUP Catalogue, Oxford University Press, number 9780198281931.
    4. Atkinson, Anthony B., 2015. "Inequality: what can be done?," LSE Research Online Documents on Economics 101810, London School of Economics and Political Science, LSE Library.
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    More about this item

    Keywords

    Inequality of income distribution; Maximisation of social welfare; Erasure of government bonds; Government expenditure for equalization; Pandemic; Market Economy;
    All these keywords.

    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • H53 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Welfare Programs

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