Trickle-Down Theory Of Income Inequality Summary

The influence of inequality on the economic growth has been debatable topic over the years. Different economists argue about linkage between the low economic growth and inequality level, while others claim that the latter directly prompts the economic improvement. Chris Tilly, who is working as a professor of Urban Planning department at the University of California, has written book overview for undergraduate students in 2004. The main goal of the author is to show the benefit of income equality on the economic growth with the help of refuting counterarguments and analyzing different cases. Also, he briefly presents the essential economic theories of how inequality constrains the efficiency and asserts that the economic growth can boost in

In the first part of the article, Tilly explains conservatives’ opinions and trickle-down theory. Conservatives claim that the rewarding system of unequal society steers the behavior of people, who are forced to make the best economic choice. The writer verifies this incentive story by giving example of the inefficient economic system in the USSR. On the other hand, trickle-down theory indicates the role of investment spending, which makes a direct contribution to the economic activity, as well as the volume of investment depends on saving ability of the rich population. This theory is rebutted by “paradox of thrift”, which was introduced by Keynes. Furthermore, the author determines the positive impacts of equality on the development. He labels equality as the distribution of land, “match effects” and “pressure effects”. According to “match effects” theory, the level of education influences the productivity of workers. The last approach illustrates that equal human rights force managers to make more efficient choices. All three

Moreover, in the last paragraph “Federal and state governments have cranked up expenditures on prisons, police, and “homeland security,” and Republican campaign organizations have devoted the major resources to keeping blacks and the poor away from the polls” (p.5), the author indicates his the political views and gives new ideas like discrimination against the black population. The conclusion part of the article gives only explanation of “inequality trap”. This example neither summarizes all given arguments nor indicates clear answer for question “Why Inequality is bad for the