Social and Behavioral Sciences Commons^™

Income Distribution And Economic Growth, Mike Freimuth

WWU Honors College Senior Projects

It is known that redistributing wealth from the rich to the poor tends to increase consumption in an economy. This is because when people’s incomes are lower they typically spend a larger percent of that income. This increase in consumption, however, must be accompanied by an equivalent decrease in savings, if savings equals investment. And if investment is the mechanism by which an economy grows, this must therefore have an effect on the growth of that economy. This paper deals strictly with the effects on long-term economic growth brought about by a change in income distribution. The purpose of this …