## Chapter 2: A Fair Shot

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### Pandemic impact on inequality, poverty, and access to services
- The COVID-19 pandemic has exacerbated preexisting inequalities and poverty and has demonstrated the importance of social safety nets.
- The crisis has highlighted inequalities in access to basic services—health care, quality education, and digital infrastructure—which may cause income gaps to persist generation after generation.
- Universal access to vaccines and progress in vaccination will be decisive in the months ahead.
- For the recovery period and beyond, policies should aim at giving everyone a fair shot at lifetime opportunities by reducing gaps in access to quality public services; for most countries this will require mobilizing additional revenues and improving the delivery of services while fostering inclusive growth.

### Evidence on differential outcomes and long-term effects
- Countries with better access to health care have had lower mortality rates, considering the age of the population and the number of cases.
- Countries with higher relative poverty have had more reported infections, especially where urbanization is more extensive.
- Some effects on labor markets will be long lasting, as will be the impact on education.
- The unprecedented scale of school closures has resulted in education losses equivalent to about one-quarter of the school year in advanced economies and one-half in emerging market and developing economies.
- The largest losses have accrued to children from poorer and less-educated families.
- In 2021, net school enrollment rates in emerging market and developing economies could drop by 1 percentage point (or about 6 million children dropping out of school).
- Children who drop out of school will experience major learning losses.

### Policy framework: addressing mutually reinforcing inequalities
- Policy responses should recognize that various aspects of inequality (income, wealth, opportunity) are mutually reinforcing and create a vicious circle.
- Interventions need to combine predistributive policies (which affect incomes before taxes and transfers) and redistributive policies (which reduce market income inequality, mostly through transfers and to a lesser extent through taxes, especially in advanced economies).

### Key policy recommendations
- Investing more and investing better in education, health, and early childhood development.
  - Additional spending on education, for example, can reduce the enrollment gap between children from poor and rich households.
  - Inefficiencies should be tackled. In emerging markets and low-income developing countries, the difference between a country’s spending efficiency and that of best performers ranges from 8 percent to 11 percent for health care and 25 percent to 50 percent for education.
- Strengthening social safety nets by expanding coverage of the most vulnerable households, and increasing adequacy of benefits.
  - Objectives can also be attained by reallocating spending to the most effective programs and by improving identification of and delivery to beneficiaries.
- Mustering the necessary revenues.
  - Advanced economies can increase progressivity of income taxation and increase reliance on inheritance/gift taxes and property taxation.
  - COVID-19 recovery contributions and “excess” corporate profits taxes could be considered.
  - Wealth taxes can also be considered if the previous measures are not enough.
  - Emerging market and developing economies should focus on strengthening tax capacity to finance more social spending.
- Acting in a transparent manner.
  - For most countries, these reforms would be best anchored in a medium-term fiscal framework as early as possible.
  - Strengthening public financial management and improving transparency and accountability, not least for COVID-19 response measures, will reinforce trust in government.
- Supporting lower-income countries that face especially daunting challenges.
  - Meeting the Sustainable Development Goals—a broad measure of the access to basic services—by 2030 would require $3 trillion for 121 emerging market economies and low-income developing countries (2.6 percent of 2030 world GDP).
  - Support from the international community is needed to aid reform efforts, with the immediate priority being affordable access to vaccines.

### Political economy and public support
- The pandemic has focused attention on governments and their ability to respond to the crisis; popular support for better public services, already significant before the pandemic, has likely risen.
- Cross-country surveys administered before the pandemic suggest respondents in advanced and emerging market economies have long expressed favor for more tax-financed spending on education, health care, and old-age care, and more progressive taxation.
- A recent survey suggests that, if a household member becomes ill with COVID-19 or loses employment, the probability of favoring progressive taxation rises by 15 percentage points.
- Meeting the rising demand for basic public services and more inclusive policies is crucial for policymakers to strengthen public trust and support social cohesion.

*International Monetary Fund | April 2021*

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_Source: https://www.imf.org/-/media/files/publications/fiscal-monitor/2021/april/english/ch2execsum.pdf_