The debate on growth versus inequality hinges on the idea of incentives. When economists talk about incentives, they mean a motivation for material (monetary) gains. People work hard because they expect that their efforts (their investment) will increase their income. For the economic system to work, there needs to be a connection between (ex-ante) effort and (ex-post) income. Does that mean that some degree of inequality is necessary? Does that mean that more inequality always creates better incentives? The answers are probably yes and no, but the link between incentives and inequality can be
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