{"id":1563,"date":"2015-03-23T10:32:44","date_gmt":"2015-03-23T09:32:44","guid":{"rendered":"https:\/\/blog.iese.edu\/economics\/?p=1563"},"modified":"2015-05-21T10:39:57","modified_gmt":"2015-05-21T09:39:57","slug":"redistribution-is-not-enough","status":"publish","type":"post","link":"https:\/\/blog.iese.edu\/economics\/2015\/03\/23\/redistribution-is-not-enough\/","title":{"rendered":"Redistribution is not Enough"},"content":{"rendered":"

Ricardo Hausmann<\/strong>\u00a0recently wrote a piece titled \u201cRedistribution or inclusion?<\/a>\u201d for\u00a0Project Syndicate<\/em>. It provides\u00a0a different view of the causes of inequality of income, looking particularly at developing countries<\/strong>. It points out that\u00a0modern production requires many complementary inputs, many of which are present in advanced economies, but lacking in emerging economies<\/strong>. Some years ago a friend told me that he had spent a few days in Egypt in a very modern hotel in which some sockets didn\u2019t work because it was impossible to find replacements locally.<\/p>\n

\"Favela<\/a>
Favela Dona Marta, Rio de Janeiro, seen from Corcovado. Author: Brian Snelson<\/figcaption><\/figure>\n

Hausmann\u2019s concludes that: \u201cTo address the problem requires\u00a0investing in inclusion<\/strong>,\u00a0endowing people with skills, and connecting them to the inputs and networks that can make them productive<\/strong>. The dilemma is that poor countries lack the means to connect all places to all inputs.\u201d<\/p>\n

\u201cThe other problem of modern production is\u00a0how to distribute the income generated by all of the complementary inputs<\/strong>.\u201d When various people work together on a project, they create more value than the opportunity costs of the individual members, in other words, the total worth of these members if they were working elsewhere.<\/p>\n

\u201cWho gets to pocket this \u201cteam surplus<\/strong>\u201d? Traditionally, the assumption has been that it accrues to shareholders.\u00a0But the rise of extreme CEO compensation\u00a0<\/span><\/strong>(\u2026)\u00a0may reflect CEOs\u2019 ability to disrupt the team if they do not get part of the surplus<\/strong>. After all, CEOs experience precipitous income declines when they are kicked out, indicating that they were paid far more than their opportunity cost\u201d: they were taking home part of the income created by their employees.<\/p>\n

Hausmann concludes that it might be a matter of reducing the income of those who receive the most, but that\u00a0\u201ca much bigger and sustainable bang can be achieved if the proceeds go instead to financing inclusion<\/strong>. In the end,\u00a0inclusive growth may generate a more prosperous and egalitarian society, whereas redistribution may fail to benefit either inclusion or growth<\/strong>.\u201d<\/p>\n

 <\/p>\n","protected":false},"excerpt":{"rendered":"

Ricardo Hausmann\u00a0recently wrote a piece titled \u201cRedistribution or inclusion?\u201d for\u00a0Project Syndicate. It provides\u00a0a different view of the causes of inequality of income, looking particularly at developing countries. It points out that\u00a0modern production requires many complementary inputs, many of which are present in advanced economies, but lacking in emerging economies. Some years ago a friend told […]<\/p>\n","protected":false},"author":172,"featured_media":1619,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[575],"tags":[90840,80125],"class_list":["post-1563","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-emerging-countries","tag-inequality","tag-redistribution","megacategoria-mc-economics"],"acf":[],"aioseo_notices":[],"_links":{"self":[{"href":"https:\/\/blog.iese.edu\/economics\/wp-json\/wp\/v2\/posts\/1563","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/blog.iese.edu\/economics\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/blog.iese.edu\/economics\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/blog.iese.edu\/economics\/wp-json\/wp\/v2\/users\/172"}],"replies":[{"embeddable":true,"href":"https:\/\/blog.iese.edu\/economics\/wp-json\/wp\/v2\/comments?post=1563"}],"version-history":[{"count":5,"href":"https:\/\/blog.iese.edu\/economics\/wp-json\/wp\/v2\/posts\/1563\/revisions"}],"predecessor-version":[{"id":1585,"href":"https:\/\/blog.iese.edu\/economics\/wp-json\/wp\/v2\/posts\/1563\/revisions\/1585"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/blog.iese.edu\/economics\/wp-json\/wp\/v2\/media\/1619"}],"wp:attachment":[{"href":"https:\/\/blog.iese.edu\/economics\/wp-json\/wp\/v2\/media?parent=1563"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/blog.iese.edu\/economics\/wp-json\/wp\/v2\/categories?post=1563"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/blog.iese.edu\/economics\/wp-json\/wp\/v2\/tags?post=1563"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}