Abstract
Findings from this experiment contributed novel insights into the theoretical field of welfare policy, addressing fundamental questions about wealth redistribution rules and norms. The expenses of the redistribution pertaining to basic goods, as well as those associated with public (non-basic) but vital goods, are separately estimated by transforming the expenses into functions of the poverty line. The findings reveal that, along the poverty line that treats all citizens equally, the politicians representing opposing ideologies decide how the redistribution of basic and vital goods should be financed. Politicians should come to an agreement, subject to an approval of their decisions by voters-citizens. However, in the absence of such approval, politicians have no alternative but to continue the negotiations. Based on this premise, we concluded that political decisions with an elevated poverty line as a parameter would give rise to inverse working incentives of benefits claimants. This may result in unbalanced books, due to the expenditure on the delivery of basic and non-basic goods to their respective destinations. By keeping the books in balance, we postulate that one half of median income μ, in accord with Fuchs point, may be used in the form of poverty line ½μ for just and fair wealth redistribution in resolving the ideological controversies between left- and right-wing politicians. Through the income exception rule equal to ½μ, as a result of a relief payments simulation, the wealth redistribution system, known since 1962 from as Friedman’s Negative Income Tax (NIT), diminished the Gini coefficient.
Highlights
Political competition related to wealth redistribution often fosters debate regarding what the state
As already stated, we focus our analysis on two visionary politicians
The root of the controversy is that the left-wing politicians struggle—in response to public aspirations—in pursuing their own political causes for the increase of basic goods, whereas the right-wing politicians advocate for meeting the needs for non-basic goods
Summary
Political competition related to wealth redistribution often fosters debate regarding what the state “should” or “should not” deliver. Wider and more substantial welfare benefits and relief payments could be problematic, as they might encourage certain behaviors, such as low savings or productivity, when economic security is guaranteed. They may lead to high wage demands as an incentive to remain in employment, given that unemployment benefits are substantial and are compensated by high tax rates τ. High taxes are an incentive for entering a black labor market that avoids paying taxes, or moonlighting, i.e., holding multiple jobs. Excessive benefits might result in human capital not developing quickly and well enough, i.e., “implicit support to those waiting on benefits looking for the ‘right type of job’ or a job that pays well enough”, as noted by Oakley and Saunders [1]
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