he East Asian economies, excluding China, had annual per capita growth of 7.6%, while income inequality remained stable or declined. Japan and Sweden have also combined rapid growth and low inequality.” These are important findings, since they contradict the conventional view that it is better to channel income to the rich, who tend to save and invest more. Therefore, we can say that a more equal income distribution would have a positive effect on the economy and in fact it help the economy to grow better.With an equal income distribution, improvements are made to economic development from this overall effect. First, income equality acts as the main incentive for a rapid growth in the development. If there are huge differences between the rich and the poor, the poor may not be motivated to work more because they won’t get equitable pays. Studies have already showed that the low income of the poor leads to low productivity. Therefore if a large proportion of national income are distributed to only the rich people, then the production would be distorted even to a worsen level. Thus, achieving an equal income distribution is very important to the economic growth of the country. Second, it stimulates the economy by improving the purchasing power in the economy. If unequal distribution of income exists, the people with high purchasing power are concentrated in the elites that form less than one percent of the population. In fact, the rich in less developed countries do not necessarily save and invest locally much of their income. Therefore, this will narrow down the real purchasing power within a country. Third, a more equal distribution of income changes the composition of demand towards more labor-intensive products - and this stimulates both growth and employment. If the income range can be narrowed between the highest-paid and the lowest-paid public-sector worker, then more employment opportunities would be created. In most...
