Inequality = good for us all?

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  • Created by: lyd_kate
  • Created on: 03-04-18 12:49

Intro - Certain level is good to provide work incentives  - but not to the extent where there's poverty, this is not good

1) Incentives to study and gain skills (ability to have more income - more utility from higher living standards) Skills - workers will be paid MRP, increases labour productivity and international competitiveness (causing economic growth in the long term) but this still requires a normative judgment to determine if this is equitable. If government = monopolistic employer of eg teachers, doctors, dentists already below MRP. Govt failure possibly if intervention as e.g a max wage could stop inequality but would reduce productivity/innovation

2)Entrepreneurships as reward for innovation = profit. Dynamic efficiency = better quality products for consumers. Profits can feeded back to workers through trickle down effect, as when firms earn more

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