Does trickle-down economics work? Guess who says that it doesn’t.
The idea that increased income inequality makes economies more dynamic has been rejected by an International Monetary Fund study, which shows the widening income gap between rich and poor is bad for growth.
A report by five IMF economists dismissed “trickle-down” economics, and said that if governments wanted to increase the pace of growth they should concentrate on helping the poorest 20% of citizens.
The study – covering advanced, emerging and developing countries – said technological progress, weaker trade unions, globalisation and tax policies that favoured the wealthy had all played their part in making widening inequality “the defining challenge of our time”.
This is the opening to a short article on a new IMF study that deserves special attention and appropriate action.