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Redistribution of wealth


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Redistribution of wealth

  1. 1. <ul><li>Redistribution of Wealth : Role of state </li></ul><ul><li>Presented by- </li></ul><ul><li>Rohit Phulsunge </li></ul>
  2. 2. Overview <ul><li>Wealth all across the globe held by 4.4 billion adults, has increased by 72 percent since the year 2000 to reach $195 trillion </li></ul><ul><li>It is estimated to rise further by 62% to $315 trillion by 2015 (Source: Credit Suisse Research Institute) </li></ul>
  3. 3. Re-distribution of wealth (ROW) <ul><li>It refers to the transfer of wealth in 2 ways:- </li></ul><ul><li>Progressive redistribution : It signifies the transfer of wealth from the rich to the poor </li></ul><ul><li>Regressive redistribution : It signifies the transfer of wealth from the poor to the rich </li></ul><ul><li>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- </li></ul><ul><li>Taxation </li></ul><ul><li>Monetary policies </li></ul><ul><li>Welfare </li></ul><ul><li>Nationalization </li></ul><ul><li>Charity etc </li></ul>
  4. 4. Gini index : A tool to measure ROW <ul><li>Gini coefficient is a useful tool used by economists to measure the disparity in distribution of wealth across the population of a country </li></ul><ul><li>According to Gini coefficient: “ The higher a Gini coefficient the more unequal is the distribution of wealth” </li></ul><ul><li>If Gini coefficient = 1 , then it signifies complete inequality </li></ul><ul><li>If Gini coefficient =0 , then it signifies complete equality </li></ul><ul><li>So ideally a nation’s Gini coefficient should be as low as possible with 0 being a hypothetical ideal point </li></ul>
  5. 5. Gini index chart of the globe Source : www. gini
  6. 6. <ul><li>Top 20 nations from most equal to most unequal in terms of distribution of wealth </li></ul>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
  7. 7. Role of state in reducing disparity <ul><li>There are several measures incorporated by the government to reduce inequality:- </li></ul><ul><li>1) Building efficient and transparent product markets </li></ul><ul><li>2) Expanding financial markets </li></ul><ul><li>3) Raising the income of those at the bottom through labor market reforms </li></ul><ul><li>4) Using distributive fiscal policies </li></ul>
  8. 8. 1) Building efficient and transparent product markets <ul><li>The factors which affect the expansion of new private firms are: </li></ul><ul><li>Anti-competitive practices </li></ul><ul><li>Licensing </li></ul><ul><li>Regulations </li></ul><ul><li>Corrupt practices </li></ul><ul><li>To build efficient and transparent product markets , the above factors should be kept under a check. </li></ul>
  9. 9. 2) Expanding financial markets <ul><li>The problems faced by firms are:- </li></ul><ul><li>New firms and especially small enterprises still face difficulties accessing long-term finance </li></ul><ul><li>Very shallow credit markets; private/small firms and SOEs have differential access </li></ul><ul><li>Firms face problems financing even working capital </li></ul><ul><li>Government should focus on expanding financial markets by implementing the above objectives. </li></ul>
  10. 10. 3) Raising the income of those at the bottom through labor market reforms <ul><li>Some of the measures that should be followed by government are:- </li></ul><ul><li>1) Focus on raising incomes of low-skilled workers while maintaining wage flexibility </li></ul><ul><li>2) Antidiscrimination policies </li></ul><ul><li>3) Skill upgrading for poorest important in medium term </li></ul><ul><li>4) Product markets and governance are key to achieve parity </li></ul>
  11. 11. 4) Using distributive fiscal policies <ul><li>Government should focus on the following to enable effective distributive fiscal policies </li></ul><ul><li>Focus on improving targeting of transfers </li></ul><ul><li>Policies to foster accumulation of public capital and education in poorest regions (within countries) </li></ul><ul><li>Scope to improve taxation and tax compliance </li></ul><ul><li>Restoring fiscal balance </li></ul><ul><li>Improve tax compliance and budget execution(arrears) </li></ul>
  12. 12. <ul><li>The End </li></ul>