Robin Hood Effect (Economics) - Explained
What is the Robin Hood Effect?
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Table of ContentsWhat is the Robin Hood Effect?How Does the Robin Hood Effect Work?Objectives of Income RedistributionAcademic Research on the Robin Hood Effect
What is the Robin Hood Effect?
The Robin Hood effect is an economic situation whereby wealth is stolen from the rich to give to the poor in society in order to reduce economic inequality. The Robin Hood Effect entails the redistribution of wealth in the economy in which the poor acquire more financial stability at the expense of the rich. The Robin Hood effect is named after Robin Hood, who in history stole from the rich to give to the poor. The reason for this act is borne out of the belief that the rich became wealthy by stealing from the poor through diverse means, hence, in order to redistribute wealth, the poor must gain at the expense of the rich.
How Does the Robin Hood Effect Work?
The Robin Hood effect is associated with wealth or income inequality, this phenomenon is based on the poor gaining economic and financial stability at the expense of the rich. When the rich (those who are better-off) gain at the expense of the poor (less well-off), this is a reverse of the Robin Hood effect. The main objective of the Robin Hood effect is the redistribution of wealth and income in an economy so that inequality is reduced. Certain Fiscal policies can also give rise to the use of the Robin Hood effect. This purpose effect is achieved when policies that are in the best interest of the public are enacted. For instance, when the government collects higher taxes from the wealthy and lower and no taxes from the poor, the Robin Hodd effect is attained.
Objectives of Income Redistribution
The core objectives of the Robin Hood effect are highlighted below;
- The redistribution of wealth and income in an economy.
- To create a reduction in economic inequality and provide more opportunities for those who are less well-off in society.
- To relieve the burdens of the poor and make them gain more financial stability at the expense of the rich, such as a reduction in taxes paid by the poor and increase in taxes paid by the wealthy.
- The Robin Hood effect also support that provision of public services funded by the tax paid by the rich, such provisions will be benefited by the poor members of the society.
- Fiscal Policy
- Expansionary vs Contractionary Fiscal Policy
- Stabilization Policy
- Robin Hood Effect
- Ricardo Barro Effect
- Autonomous Spending
- Autonomous Consumption
- Golden Rule
- Ricardian Equivalence
- Balanced Budget - Deficit and Surplus
- National Debt
- Standardized Employment Budget
- Deficit Hawk
- Twin Deficits