Inequality and Fiscal Policy
Books, September 21, 2015
Source details
- Canonical URL
- Inequality and Fiscal Policy
Other formats
Bibliographic details
- Authors: Benedict J. Clements, Ruud A. de Mooij, Sanjeev Gupta, Michael Keen
- Published: September 21, 2015
- Series: Books
- DOI: https://doi.org/10.5089/9781513531625.071
Overview
- The book analyzes fiscal policy and its link with inequality, emphasizing that fiscal policy is the government’s most powerful tool for addressing inequality.
- Fiscal policy affects households’ consumption:
- directly through taxes and transfers, and
- indirectly via incentives for work and production and the provision of public goods and individual services such as education and health.
- Central message: growth and equity are not necessarily at odds; with the appropriate mix of policy instruments and careful policy design, countries can in many cases achieve better distributional outcomes and improve economic efficiency.
Major findings
- The sizeable increase in income inequality experienced in advanced economies and many parts of the world since the 1990s and the severe consequences of the global economic and financial crisis have brought distributional issues to the top of the policy agenda.
- Fiscal tools can be designed to address rising inequality while promoting economic efficiency and more robust economic growth.
- The analysis builds on and extends work done at the IMF and includes contributions from leading academics.
Country studies (illustrating diversity of challenges)
- Netherlands
- China
- India
- Republic of Congo
- Brazil
- These country studies demonstrate the diversity of challenges across countries and their differing capacity to use fiscal policy for redistribution.
Policy implications and recommendations
- Use a mix of policy instruments to improve distributional outcomes without sacrificing efficiency.
- Carefully design taxes, transfers, and public spending on education and health to balance equity and growth objectives.
- Consider both direct redistribution (taxes and transfers) and indirect channels (incentives, public goods) when formulating fiscal policy to address inequality.