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Inequality

IMF's Work on Income Inequality

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Infographic: Scope to Increase Tax Progressivity, IMF Fiscal Monitor, October 2017

IMF Fiscal Monitor: Tackling Inequality-Universal Basic Income

Infographic: Improve Access to Health and Education, IMF Fiscal Monitor, October 2017

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IMF's Work on Income Inequality


Over the past three decades, income inequality has declined substantially at the global level. However, within countries, the picture is mixed with some countries experiencing a reduction in inequality while others, particularly advanced economies, have seen a significant increase. Research indicates that increased inequality can erode social cohesion, lead to political polarization, and ultimately lower economic growth. The IMF's work on income inequality looks at how fiscal policy can help governments tackle high levels of income inequality and benefit economic growth.

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How to Operationalize Inequality Issues in Country Work

IMF Policy Paper (2018)

Economic inclusion is the broad sharing of the benefits of, and the opportunities to participate in, economic growth. It embodies equitable outcomes related to financial well-being as well as opportunities in access to markets and resources, and protects the vulnerable.


IMF Direct Blog

IMFBlog: 5 Things You Need to Know About Inequality
Global income inequality has declined in recent years, with the Gini index—a statistical measure of income distribution with a value of zero indicating perfect equality—dropping from 68 in 1988 to 62 in 2013, reflecting relatively strong growth in many emerging and developing economies, particularly in China and India. However, inequality has increased within many countries, including in many advanced economies.


IMF Direct Blog

IMFBlog: A Dream Deferred: Inequality and Poverty Across Generations in Europe
The poet Langston Hughes once asked, “What happens to a dream deferred?” It is a relevant question to millions around the world today, especially young people, because of inequality and poverty.


IMF Direct Blog

IMFBlog: Chart of the Week: Inequality, Your Health, and Fiscal Policy
The gap in life expectancy between rich and poor people is a worldwide phenomenon, and has grown dramatically in recent years in some countries. In our Chart of the Week, we show how this longevity gap, which reflects inequality in access to health care and its impact on peoples’ overall health, varies across countries.




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Tackling Inequality

IMF Fiscal Monitor: October 2017

Rising inequality and slow economic growth in many countries have focused attention on policies to support inclusive growth. While some inequality is inevitable in a market-based economic system, excessive inequality can erode social cohesion, lead to political polarization, and ultimately lower economic growth. This Fiscal Monitor discusses how fiscal policies can help achieve redistributive objectives. It focuses on three salient policy debates: tax rates at the top of the income distribution, the introduction of a universal basic income, and the role of public spending on education and health.


IMF Direct Blog

IMFBlog: Inequality: Fiscal Policy Can Make the Difference
Income inequality among people around the world has been declining in recent decades. This is due to countries like China and India’s incomes catching-up to advanced economies. But the news is not all good. Inequality within countries has increased, particularly in advanced economies.


IMF Direct Blog

IMFBlog: Sharing the Wealth: Inequality and Who Owns What
Income inequality and wealth inequality—what you have accumulated, as opposed to what you earn—is closely related. In this blog, we zoom in on inequality of wealth—the distribution of wealth across households or individuals at a given time.



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Lessons from the Old Masters on Assessing Equity and Efficiency: A Primer for Fiscal Policymakers

IMF Working Paper (2017)

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How can a society’s well-being be measured to include not only average incomes but also their distribution? How can the effects of policies be assessed by considering both equity and efficiency? This primer outlines the seminal contributions of influential economists of the past, including Arthur Okun, who developed a simple method to elicit people’s preferences regarding redistribution, and Anthony Atkinson, who showed how equity and efficiency can be measured simultaneously and summarized in a single, intuitive index expressed in monetary units (such as dollars). These methods are applied to recent data to gauge how countries fare when both mean incomes and their distribution are considered together, and to a hypothetical tax-and-transfer scheme assessed through a general equilibrium model for household-level data.


IMF Direct Blog

IMFBlog: Inequality: Tools from the Old Masters to Help Today’s Policymakers
With inequality rising in many countries, policymakers need to choose the best fiscal policies that will help share the benefits of economic growth, and in so doing, make it more inclusive.



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The IMF’s Work on Inequality: Bridging Research and Reality

IMFBlog (2017)

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Over the past three decades, income inequality has gone up in most advanced economies and in many developing ones as well. Why? Much of the research on inequality has focused on advances in technology and liberalization of trade as the main drivers. While technology and trade are global trends that are difficult to resist, IMF studies have shown that the design of government policies matters and can help limit increases in inequality.



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Causes and Consequences of Income Inequality: A Global Perspective

IMF Staff Discussion Note (2016)

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This paper analyzes the extent of income inequality from a global perspective, its drivers, and what to do about it. The drivers of inequality vary widely amongst countries, with some common drivers being the skill premium associated with technical change and globalization, weakening protection for labor, and lack of financial inclusion in developing countries. We find that increasing the income share of the poor and the middle class actually increases growth while a rising income share of the top 20 percent results in lower growth—that is, when the rich get richer, benefits do not trickle down. This suggests that policies need to be country specific but should focus on raising the income share of the poor, and ensuring there is no hollowing out of the middle class. To tackle inequality, financial inclusion is imperative in emerging and developing countries while in advanced economies, policies should focus on raising human capital and skills and making tax systems more progressive.

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Fiscal Policy and Income Inequality

IMF Staff Policy Paper (2014)

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Fiscal policy is the primary tool for governments to affect income distribution. Rising income inequality in advanced and developing economies has coincided with growing public support for income redistribution. This comes at a time when fiscal restraint is an important priority in many advanced and developing economies. In the context of the Fund’s mandate to promote growth and stability, this paper describes: (i) recent trends in the inequality of income, wealth, and opportunity in advanced and developing economies; (ii) country experience with different fiscal instruments for redistribution; (iii) options for the reform of expenditure and tax policies to help achieve distributive objectives in an efficient manner that is consistent with fiscal sustainability; and (iv) recent evidence on how fiscal policy measures can be designed to mitigate the impact of fiscal consolidation on inequality. This paper does not advocate any particular redistributive goal or policy instrument for fiscal redistribution.


IMF Direct Blog

IMFBlog: Meeting Rising Pressures to Address Income Inequality—A User’s Guide



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PODCAST: Tax and Spending Ideas to Reduce Inequality

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Redistribution, Inequality, and Growth

IMF Staff Discussion Note (2014)

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Economists are increasingly focusing on the links between rising inequality and the fragility of growth. Narratives include the relationship between inequality, leverage and the financial cycle, which sowed the seeds for crisis; and the role of political-economy factors (especially the influence of the rich) in allowing financial excess to balloon ahead of the crisis. In earlier work, we documented a multi-decade cross-country relationship between inequality and the fragility of economic growth. Our work built on the tentative consensus in the literature that inequality can undermine progress in health and education, cause investment-reducing political and economic instability, and undercut the social consensus required to adjust in the face of shocks, and thus that it tends to reduce the pace and durability of growth.


IMF Direct Blog

IMFBlog: Treating Inequality with Redistribution: Is the Cure Worse than the Disease?
Many of us have been struck by the huge increase in income inequality in the United States in the past thirty years. The rich have gotten much richer, while just about everyone else has had very modest income growth.