Answer to Question #152320 in Microeconomics for Fekadu

Question

“Poverty/Inequality-reduction programs are bad for growth and redistribution curtails incentive for saving and work.” Can this statement be right? How? 

Answer 1

The statement can be right. Poverty/inequality-reduction programs may be considered bad for growth since they may tend to create more inequality rather than eliminating it. Once the programs target particular individuals, they may discriminate others. The discrimination may result in more inequality instead of solving the problem. Such inequality may be considered bad for growth. Besides, redistribution may be considered to curtail the incentive for saving and work. In situations where people expect that they will be helped because they are poor, they will are likely to lack the incentive to save and work.