Correlation Between Market Inequality and Redistribution
"낙수 효과 Trickledown effect"란 부유층의 소득이 늘어나면 투자가 촉진돼 경기가 부양되고, 이로 인해 저소득층에게 부의 효과가 돌아가 양극단적인 소득의 불균형 현상이 해소된다는 경제학 분배 성장 이론의 하나이다.
하지만 IMF는 이달초 네놓은 경제이론 분석 보고서를 통해서 150여 개국 사례를 분석한 결과, 상위 20% 계층의 소득이 1%포인트 증가하면 이후 5년의 경제성장이 연평균 0.08%포인트 감소하는 것으로 나타났고, 반면, 하위 20%의 소득이 1%포인트 늘어나면 같은 기간의 성장이 연평균 0.38%포인트 확대되는 것으로 분석되었다고 밝했다.
IMF 보고서의 결론에 따르면, "저소득층을 쥐어짜는 것이 결국 노동 생산성 저하로 이어져 소득 불균형을 더욱 심각하게 만드는 악순환을 불가피하게 하고", 따라서 "하위 계층의 소득을 늘리고, 중산층을 유지하는 것이 성장에 도움이 된다."
IMF의 결론적 경고를 반복하면, "소득 불균형 확대가 성장과 거시 경제 안정에 심각한 충격을 준다."
cost-of-inequality-oxfam-mb180113.pdf
FT 분석 기사를 가져 오면==> June 16, 2015 12:16 am
Causes and Consequences of Income Inequality:
https://www.imf.org/external/pubs/ft/sdn/2015/sdn1513.pdf
IMF raises tempo in inequality debate
http://www.ft.com/cms/s/0/cdb48b58-139a-11e5-aa7f-00144feabdc0.html#axzz3dE1bx6S7
When the rich get richer, a country’s economic health can suffer. But if the poorest members of a society start climbing the wealth ladder, then national growth can receive a boost.
That was the message on Monday from economists at the International Monetary Fund who have raised the tempo in the debate on global inequality.
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Previous IMF research has pointed to redistributive policies having benign effects on countries’ coffers. Work produced by the fund, as well as by others including French economist Thomas Piketty, has prompted vigorous debate in economic circles.
But a new research paper, based on data from 159 advanced and developing economies for the period 1980 to 2012, goes further, and establishes a direct link between how income is distributed and national growth.
The IMF economists found that when the income share of the richest 20 per cent of the populations of these countries increased by one percentage point, gross domestic product growth ended up 0.08 percentage points lower in the following five years, “suggesting that the benefits do not trickle down”.
The same one percentage point increase in income share for the poorest 20 per cent in these economies was associated with a 0.38 per cent increase in growth. That positive relationship also held true for the middle class, the economists found.
The research was hailed on Monday by poverty campaigners, who said it marked the death of “trickle-down economics”.
Why those patterns held true, the authors said, was not wholly clear. Among the possible theories was that higher inequality can lead to under-investment in the education of poor children and lower labour productivity as a result. “Increasing concentration of incomes could also reduce aggregate demand and undermine growth, because the wealthy spend a lower fraction of their incomes than middle- and lower-income groups,” they wrote.
Change in GDP growth rate if income share changes by one percentage point
But the findings, which are likely to resonate with those pushing for governments to do more to address inequality, were unequivocal on the economic impact of wider inequality, the authors said.
“Widening inequality has significant implications for growth and macroeconomic stability,” they wrote. It can concentrate political and decision-making power in the hands of a few, “lead to a suboptimal use of human resources, cause investment-reducing political and economic instability, and raise crisis risk”.
Nicolas Mombrial, head of Oxfam International’s office in Washington DC, said: “The IMF proves that making the rich richer does not work for growth, while focusing on the poor and the middle class does.
“By releasing this report, the IMF has shown that ‘trickle down’ economics is dead; you cannot rely on the spoils of the extremely wealthy to benefit the rest of us.”
He added: “The IMF has set off the alarm for governments to wake up and start actively closing the inequality gap. The message to them is pretty clear: if you want growth, you’d better invest in the poor, invest in essential services and promote redistributive tax policies.”
낙수 효과 Trickle-down Effect 경제 이론에 대한 분석 내용 정리된 위키 소스를 가져오면==>
Overview
Trickledown effect refers to an economic theory that an increase in wealth of the upper class with eventually trickle down to benefit the remaining population. In this sense, the theory support supply-side benefit such as tax break on corporations and elimination of progressive tax, which will, as argue by its supporter, cause the benefit to trickle to a much wider range of population.
The idea of this theory is based on the premise that the increase in wealth of the top-earners will be used to stimulate economic activity through investment. These investments will in turn benefit the middle and lower class in the form of demand for workers, creating more job position and decrease unemployment. The increase in number of workers also raise the amount of tax generated, which can be used by the government to develop other sectors, thus benefiting the economy as a whole. Investments in capital goods can also lead to more efficient production and increase consumer’s accessibility to goods.
https://ib-economics.wikispaces.com/Trickle-down+Effect
Trickledown effect refers to an economic theory that an increase in wealth of the upper class with eventually trickle down to benefit the remaining population. In this sense, the theory support supply-side benefit such as tax break on corporations and elimination of progressive tax, which will, as argue by its supporter, cause the benefit to trickle to a much wider range of population.
The idea of this theory is based on the premise that the increase in wealth of the top-earners will be used to stimulate economic activity through investment. These investments will in turn benefit the middle and lower class in the form of demand for workers, creating more job position and decrease unemployment. The increase in number of workers also raise the amount of tax generated, which can be used by the government to develop other sectors, thus benefiting the economy as a whole. Investments in capital goods can also lead to more efficient production and increase consumer’s accessibility to goods. 
As well as increasing employment, tax break for the rich can also be argued to spur more economic activity and generate more tax revenue for the government. As seen from the Laffer Curve, which shows relationship between tax rate and revenue, it is possible for tax revenue to increase even if the tax rate decreases. However this second assumption can only be true if the tax rate for the rich is already past the revenue maximizing point. However, if the earlier tax rate was already less than or equal to optimum tax rate, then the revenue generated will decrease.
Supports
The workability of trickle-down effect is depended on the premise that the tax break on the top earner will stimulate domestic investment that can increase productivity in the long run. In this sense, the aggregate demand curve, which has investment as one of its compenents, will shift to the right as the investment increase, leading to increase in productivity and employment as the firms have more available funding to hire more workers. Also, if the investment is made to improve the firm's productive capability, the AS curve can also be shifted to the right, leading to a long term increase in output of the economy. In this sense, the policy may be more beneficial on specific targets such as corporation, which can be granted benefits on certain conditions.
Criticism
The trickle down effect had been negatively received, mostly by middle to low class populations, since it is often viewed as a way for the rich to keep the wealth of the nation to themselves. The theory also raises issue with Keynesian school of thought, which prefers a tax cut across the board for all population to encourage spending, rather than investment from top earners. In addition, the real life application of this theory also suffers from 2 main flaws.
I) Despite what was said in the theory, the benefit given to the rich may not necessarily trickle down, depending on their propensity to consume. If most of the benefit are saved then the amount benefit that will trickle will be much smaller. Due to this reason the theory is highly controversial. There is also a doubt that the increase in wealth of the rich can be spent more effectively than funding other governmental development project in the form of tax. 
II) The theory also fails to take into account of openness of today’s market, since, depending on where they will invest, the benefit that the rich receive may not necessarily create more job opportunity for middle and lower class in their country. For instance, if the increase in investment and spending are mainly focus abroad then the follow-up benefit will not trickle down to the workers, as illustrated in the cartoon below. 
Development
In the term of development, the idea of trickledown effect give support to policies that focus on entirely on the economic outcome, since economic development can and will eventually lead to progress in the other areas. In this sense, according to the theory, optimal level of development can be reached by focusing entirely on economic outcome and let benefit eventually trickle down in the form of employment and increase in tax revenue, which can be used to fund other developmental project that improve human and environmental outcome.
However with very few empirical evidences for the workability of this theory, it was unlikely to be able to function in the real world due to unpredictability of where and how the rich will spend their benefit.
Real Life Example
One of the countries to heavily implement the trickle down effect in their policy is the US, which is shown through the continually lower top tier tax rate. Below are graphs that shows that relationship between top tax rate and unemployment and real GDP growth rate. 
According to the graphs, there seems to be no clear correlation between top tax rate and economic development and neither does the benefit trickle down as employment to the lower class in the form of employment. Although the rate of unemployment and real GDP growth does fluctuate from times to times, they still remain relatively unchanged through out the years, despite the lowering top tax rate.
Further Reading
http://www.rationalrevolution.net/war/trickle_down.htm
http://www.bigissueground.com/politics/blair-trickledownreagan.shtml
http://money.howstuffworks.com/trickle-down-economics.htm/printable
Picture
http://mktg343.pbworks.com/f/c280tax.jpg
http://spfaust.files.wordpress.com/2010/12/trickle-down-economics.gif
http://www.corbisimages.com/images/67/29C82245-A83D-4488-9882-20177696A37F/60188-187.jpg
http://www.lotteryuniverse.com/Portals/LotteryUniverse/Images/falling_coins.jpg
References
Etebari, Mehrun. "Trickle-Down Economics: Four Reasons Why It Just Doesn't Work | United for a Fair Economy." Home | United for a Fair Economy. Web. 24 Jan. 2011.http://www.faireconomy.org/research/TrickleDown.html .
"HowStuffWorks "How Trickle-down Economics Works"" Howstuffworks "Business & Money" Web. 24 Jan. 2011. http://money.howstuffworks.com/trickle-down-economics.htm.
https://adask.wordpress.com/2014/11/02/trickle-down-theory-vs-trickle-down-reality/
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