Lane Kenworthy tittar på hur ekonomisk tillväxt kommit eller inte kommit de fattigare skikten till del i olika länder.
Both countries [USA och Sverige] enjoyed significant economic growth. But in the U.S. the incomes of low-end households didn’t improve much, apart from a brief period in the late 1990s. In Sweden growth was much more helpful to the poor.
In Austria, Belgium, Denmark, Finland, France, Ireland, the Netherlands, Norway, Spain, and the United Kingdom, the pattern during these years resembles Sweden’s. In Australia, Canada, Germany, Italy, and Switzerland it looks more like the American one. (More graphs here.)
What accounts for this difference in the degree to which economic growth has boosted the incomes of the poor? We usually think of trickle down as a process of rising earnings, via more work hours and higher wages. But in almost all of these countries (Ireland and the Netherlands are exceptions) the earnings of low-end households increased little, if at all, over time. Instead, as the next chart shows, it is increases in net government transfers — transfers received minus taxes paid — that tended to drive increases in incomes.
None of these countries significantly increased the share of GDP going to government transfers. What happened is that some nations did more than others to pass the fruits of economic growth on to the poor.
Trickle down via transfers occurs in various ways. In some countries pensions, unemployment compensation, and related benefits are indexed to average wages, so they tend to rise automatically as the economy grows. Increases in other transfers, such as social assistance, require periodic policy updates. The same is true of tax reductions for low-income households.