Suppose the conditions of the first welfare theorem hold.If the government redistributes income prior to production and trade occurring, the market outcome (resulting from production and trade) will be the same as it would have been had the government not redistributed income (so long as redistribution does not produce deadweight losses).

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The first welfare theorem states that under certain conditions (perfect competition, no externalities, etc.), a market will reach an efficient allocation of resources. However, redistributing income changes individuals' initial endowments and thus their demand for goods. This can lead to a different allocation of resources in the market, even if there are no deadweight losses from the redistribution itself.

Suppose the Conditions of the First Welfare Theorem Hold