Other Policies to Reduce Inequality & Poverty (DP IB Economics)
Revision Note
Other Policies
The poverty cycle diagram (below) was introduced in the previous subtopic and helps to explain the causes of poverty
Any policy that helps to break the poverty cycle at any point will help to improve the standards of living within a country
Policies used to alleviate poverty include promoting economic growth, improving education, providing more generous state benefits, progressive taxation, and the establishment/increase of a national minimum wage
Policies which help to improve any factor in the diagram will help to alleviate poverty
How Different Policies Alleviate Poverty
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Investing in human capital e.g. education |
| Higher education/skill levels → higher human capital → increased productivity → higher output → higher income |
More generous transfer payments |
| More benefits → higher wages → better education/healthcare → better human capital → better productivity → higher wages |
Establishment/increase of national minimum wage |
| Higher wages → better education/healthcare → better human capital → better productivity → higher wages |
Establishing a universal basic income |
| Minimum income for all → better education/healthcare → better human capital → improved labour offer → decreasing unemployment |
Targeted government spending on goods/services |
| Higher education/skill levels → higher human capital → increased productivity → higher output → higher income |
Policies to reduce discrimination |
| Less discrimination → better productivity → higher wages |
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