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Redistribution of wealth
 

Redistribution of wealth

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    Redistribution of wealth Redistribution of wealth Presentation Transcript

      • Redistribution of Wealth : Role of state
      • Presented by-
      • Rohit Phulsunge
    • Overview
      • Wealth all across the globe held by 4.4 billion adults, has increased by 72 percent since the year 2000 to reach $195 trillion
      • It is estimated to rise further by 62% to $315 trillion by 2015 (Source: Credit Suisse Research Institute)
    • Re-distribution of wealth (ROW)
      • It refers to the transfer of wealth in 2 ways:-
      • Progressive redistribution : It signifies the transfer of wealth from the rich to the poor
      • Regressive redistribution : It signifies the transfer of wealth from the poor to the rich
      • Transfer of “wealth” is a broad concept and it usually encompasses transfer of wealth, income, property from some individuals to other by means of some social factors like-
      • Taxation
      • Monetary policies
      • Welfare
      • Nationalization
      • Charity etc
    • Gini index : A tool to measure ROW
      • Gini coefficient is a useful tool used by economists to measure the disparity in distribution of wealth across the population of a country
      • According to Gini coefficient: “ The higher a Gini coefficient the more unequal is the distribution of wealth”
      • If Gini coefficient = 1 , then it signifies complete inequality
      • If Gini coefficient =0 , then it signifies complete equality
      • So ideally a nation’s Gini coefficient should be as low as possible with 0 being a hypothetical ideal point
    • Gini index chart of the globe Source : www. gini -research.org
      • Top 20 nations from most equal to most unequal in terms of distribution of wealth
      Source : The Times of INDIA Nation( From 1 to 10 down) Gini index(%) Japan 54.7 China 55 Spain 57 South Korea 57.9 Italy 60.9 Finland 62.1 Australia 62.2 Netherlands 65 Taiwan 65.5 Bangladesh 66 Nation ( From 10 to 20 down) Gini index(%) Germany 66.7 India 66.9 Vietnam 68.2 Canada 68.9 UK 69.7 Pakistan 69.8 Russia 69.9 Thailand 71 Turkey 71.8 France 73
    • Role of state in reducing disparity
      • There are several measures incorporated by the government to reduce inequality:-
      • 1) Building efficient and transparent product markets
      • 2) Expanding financial markets
      • 3) Raising the income of those at the bottom through labor market reforms
      • 4) Using distributive fiscal policies
    • 1) Building efficient and transparent product markets
      • The factors which affect the expansion of new private firms are:
      • Anti-competitive practices
      • Licensing
      • Regulations
      • Corrupt practices
      • To build efficient and transparent product markets , the above factors should be kept under a check.
    • 2) Expanding financial markets
      • The problems faced by firms are:-
      • New firms and especially small enterprises still face difficulties accessing long-term finance
      • Very shallow credit markets; private/small firms and SOEs have differential access
      • Firms face problems financing even working capital
      • Government should focus on expanding financial markets by implementing the above objectives.
    • 3) Raising the income of those at the bottom through labor market reforms
      • Some of the measures that should be followed by government are:-
      • 1) Focus on raising incomes of low-skilled workers while maintaining wage flexibility
      • 2) Antidiscrimination policies
      • 3) Skill upgrading for poorest important in medium term
      • 4) Product markets and governance are key to achieve parity
    • 4) Using distributive fiscal policies
      • Government should focus on the following to enable effective distributive fiscal policies
      • Focus on improving targeting of transfers
      • Policies to foster accumulation of public capital and education in poorest regions (within countries)
      • Scope to improve taxation and tax compliance
      • Restoring fiscal balance
      • Improve tax compliance and budget execution(arrears)
      • The End