This is an archived article that was published on sltrib.com in 2016, and information in the article may be outdated. It is provided only for personal research purposes and may not be reprinted.
Recently, the International Monetary Fund (a relatively conservative group) has produced two multi-country studies that should put to rest trickle-down economics. The studies also reinforce what most of us already sense: that the obscene income inequalities produced by our system are hurting us all, signaling a dire need for reform.
One study found that raising the income share of the middle class and poor increases growth, while a rising income share of the top 20 percent results in lower growth. That is, when the rich get richer, benefits do not trickle down. It concluded that advanced economies like ours should focus on raising human capital and skills (education, job training, etc.) and making tax systems more progressive.
The other study found (1) that lower net income inequality (after taxes and transfers) is robustly correlated with faster and more durable growth for a given level of income redistribution; and (2) that redistribution appears generally benign in terms of its impact on growth — only in extreme cases is there some evidence that it may have direct negative effects on growth. Thus, the effects of redistribution — including the growth effects of the resulting lower inequality — are on average pro-growth.
Karl Johnson
Salt Lake City