In a good society, the living standards of the least well-off rise over time. One way to achieve that is rising redistribution: government steadily increases the share of the economy (the GDP) that it transfers to poor households. But there is a limit to this strategy. If the pie doesn’t increase in size, a country can redistribute until everyone has an equal slice but then no further improvement in incomes will be possible. For the absolute incomes of the poor to rise, we need economic growth. We also need that growth to trickle down to the poor. Does it?
The following charts show what happened in the United States and Sweden from the late 1970s to the mid 2000s…