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The Incentive-Constraint Cognitive Framework, Basic Ideas, Principles and Suggestions on Optimizing Income Distribution

【Authors】
JIA Kang, CHENG Yu & YU Changge
【WorkUnit】
Chinese Academy of Fiscal Sciences, 100142
【Abstract】

Income distribution is a major and complex problem which is directly related to the vital interests of hundreds of millions of people. To deepen the reform of income distribution system, we need to clarify the precise connotation of the relationship between fairness and efficiency under the framework of “incentive constraint” and make a correct analysis of the reasons for the formation of income differences, so as to lay a foundation for considering policy rationality. The basic idea of the optimization of income distribution in China, should be based on “common prosperity” as the vision of “goal oriented”, with “problem oriented”, accelerate the transformation from “first rich” to “altogether rich” strategy. The basic principles should be as followed: giving incentive for entrepreneurship and innovation by reasonable income distribution; acknowledging the contribution of the elements, combining distribution according to work and distribution according to other factors; while appropriately allow the widening of income gap on the first half of the “inverted U curve”, taking the initiative to control the “polarization”; taking the reform as the leader to drive the distribution system and the policy system dynamically. On this basis, we should establish and improve the system of the initial distribution of national income with the fairness of rule and the fairness of process, establish and improve the national income redistribution system that the results were evenly leveled; also improve the third distribution system of national income, and promote the coordinated reforms of the supporting system for the distribution of national income.
 
JEL: H00, H20, H50

【KeyWords】
Income Distribution, Incentive Constraint, Common Prosperity, Earlier Rich and Altogether Rich