Global Income Inequality, Trickle-Down Economics, and Charity in Islamic Economics

Abstract

Islam promotes charity both at an individual as well as at the community/society level. Charity has been almost a moral issue rather than an economic one though it affects the society in terms of economics. Mainstream economics has ignored the application of charity model and how it can result in reducing economic disparities. Unfortunately, charity has been ignored by researchers in the context of it being an economic entity. In 2015, International Monetary Fund (IMF) and Organization for Economic Cooperation and Development (OECD) pinpointed the persisting issue of global income inequality and gave thumbs down to the populist approach of “trickle-down economics.” This study aims to theoretically examine how the concept of charity addresses the issue of global income inequality and denies trickle-down economics. The evidence suggest that countries can minimize income inequality by mobilizing the concept of charity. The concept of charity can result in a huge amount of transfers from the upper 10% to the lower 10% of the income bracket.