{
  "title": "Inequality: Tools from the Old Masters to Help Today’s Policymakers",
  "publication": "IMF Blog, October 3, 2017",
  "sourceUrl": "https://www.imf.org/en/blogs/articles/2017/10/03/inequality-tools-from-the-old-masters-to-help-todays-policymakers",
  "canonical": "https://www.imf.org/en/blogs/articles/2017/10/03/inequality-tools-from-the-old-masters-to-help-todays-policymakers",
  "overlayPath": "/en/blogs/articles/2017/10/03/inequality-tools-from-the-old-masters-to-help-todays-policymakers/index.md",
  "summary": "Authors: Vitor Gaspar, Paolo Mauro, Tigran Poghosyan",
  "sections": [
    {
      "heading": "Overview",
      "content": "- Authors: Vitor Gaspar, Paolo Mauro, Tigran Poghosyan\n- Publication date: October 3, 2017\n- Core message: Tools developed by economists such as Arthur Pigou and Anthony Atkinson combine a country’s total income and its distribution into single measures of economic welfare; these tools are well known in academia but underutilized in policymaking and can help weigh equity and efficiency when designing fiscal policy."
    },
    {
      "heading": "Measurement approach: Atkinson’s welfare measure",
      "content": "- Atkinson’s measure expresses welfare in a country’s currency and combines total income and income distribution into one summary metric.\n- The measure involves explicitly weighing equity and efficiency trade-offs determined by policy choices and by the observer’s degree of aversion to inequality.\n- Illustrative two-person example (used to explain the concept):\n  - Rich individual income: $250,000 a year\n  - Poor individual income: $10,000 a year\n  - Total income: $260,000\n  - Equalized income alternative (from the perspective of an external observer who strongly dislikes inequality): $20,000 for each person\n  - Efficiency loss tolerated to attain equality in that example: $220,000\n  - From that observer’s perspective, $20,000 is the summary measure of welfare for that two-person society.\n- Analytical procedure used in the paper:\n  - The authors compute Atkinson welfare for all countries, repeating the exercise for different degrees of aversion to inequality.\n  - When comparing countries, the same degree of aversion to inequality is applied to all countries so they are evaluated using a common standard.\n  - The paper’s figure positions countries by mean income (horizontal axis) and Atkinson welfare (vertical axis); the distance below a dotted line captures the effect of inequality on welfare for each country.\n  - The figure can be viewed for different aversions to inequality; the first screen shows results for a high aversion to inequality and readers can view results for a lower aversion by selecting other tabs."
    },
    {
      "heading": "Key empirical findings and cross-country comparisons",
      "content": "- General pattern:\n  - Richer countries tend to enjoy greater Atkinson welfare, but inequality materially affects welfare rankings.\n  - For a given level of income, Atkinson’s welfare is lower the more the external observer dislikes inequality.\n- Specific comparisons highlighted:\n  - South Africa vs Kyrgyz Republic and Albania:\n    - South Africa’s mean income is more than double that of the Kyrgyz Republic, and substantially above that of Albania.\n    - However, inequality is higher in South Africa.\n    - A highly inequality-averse external observer would judge welfare to be significantly higher in the Kyrgyz Republic and Albania than in South Africa.\n  - United States vs Sweden and the United Kingdom:\n    - Mean incomes are higher in the United States than in Sweden or the United Kingdom.\n    - Inequality is higher in the United States.\n    - Thus, a highly inequality-averse observer would consider welfare to be higher in Sweden and the United Kingdom than in the United States."
    },
    {
      "heading": "Policy implications and recommendations",
      "content": "- Policymakers should use combined measures of income and distribution (such as Atkinson’s measure) to assess the welfare impact of fiscal policy, explicitly accounting for equity–efficiency trade-offs.\n- Applying a common degree of aversion to inequality across countries allows consistent cross-country welfare comparisons and better-informed policy choices.\n- Tools that express welfare in currency units (like Atkinson’s) make trade-offs between equality and efficiency tangible and actionable for fiscal policy design.\n- Given rising inequality and growing public concern about its social and economic impacts, fiscal policy analysis should incorporate these welfare measures to help make growth more inclusive."
    },
    {
      "heading": "Upcoming related publication",
      "content": "- The authors note that new data and analysis on how fiscal policy can help reduce inequality will be published in the Fiscal Monitor on October 11.\n\nSource: IMF blog post “Inequality: Tools from the Old Masters to Help Today’s Policymakers,” October 3, 2017.\n\n---\n\n\n References\n\n- https://www.imf.org/wp-content/uploads/2017/10/BLOG-1024x600-South-Africa-man-sitting-on-side-walk-Rogan-Ward-Newscom-rtrleight920132.jpg\n- paper\n\nSource: https://www.imf.org/en/blogs/articles/2017/10/03/inequality-tools-from-the-old-masters-to-help-todays-policymakers"
    }
  ],
  "bullets": [
    "[Markdown version](/en/blogs/articles/2017/10/03/inequality-tools-from-the-old-masters-to-help-todays-policymakers/index.md)",
    "[Structured JSON version](/en/blogs/articles/2017/10/03/inequality-tools-from-the-old-masters-to-help-todays-policymakers/index.json)",
    "[Bundle manifest](/en/blogs/articles/2017/10/03/inequality-tools-from-the-old-masters-to-help-todays-policymakers/bundle-manifest.json)",
    "Authors: Vitor Gaspar, Paolo Mauro, Tigran Poghosyan",
    "Published: October 3, 2017",
    "Authors: Vitor Gaspar, Paolo Mauro, Tigran Poghosyan",
    "Publication date: October 3, 2017",
    "Core message: Tools developed by economists such as Arthur Pigou and Anthony Atkinson combine a country’s total income and its distribution into single measures of economic welfare; these tools are well known in academia but underutilized in policymaking and can help weigh equity and efficiency when designing fiscal policy.",
    "Atkinson’s measure expresses welfare in a country’s currency and combines total income and income distribution into one summary metric.",
    "The measure involves explicitly weighing equity and efficiency trade-offs determined by policy choices and by the observer’s degree of aversion to inequality.",
    "Illustrative two-person example (used to explain the concept):",
    "Analytical procedure used in the paper:",
    "General pattern:",
    "Specific comparisons highlighted:",
    "Policymakers should use combined measures of income and distribution (such as Atkinson’s measure) to assess the welfare impact of fiscal policy, explicitly accounting for equity–efficiency trade-offs.",
    "Applying a common degree of aversion to inequality across countries allows consistent cross-country welfare comparisons and better-informed policy choices.",
    "Tools that express welfare in currency units (like Atkinson’s) make trade-offs between equality and efficiency tangible and actionable for fiscal policy design.",
    "Given rising inequality and growing public concern about its social and economic impacts, fiscal policy analysis should incorporate these welfare measures to help make growth more inclusive.",
    "The authors note that new data and analysis on how fiscal policy can help reduce inequality will be published in the Fiscal Monitor on October 11.",
    "[https://www.imf.org/wp-content/uploads/2017/10/BLOG-1024x600-South-Africa-man-sitting-on-side-walk-Rogan-Ward-Newscom-rtrleight920132.jpg](https://www.imf.org/wp-content/uploads/2017/10/BLOG-1024x600-South-Africa-man-sitting-on-side-walk-Rogan-Ward-Newscom-rtrleight920132.jpg)",
    "[paper](http://www.imf.org/en/Publications/WP/Issues/2017/10/03/Lessons-from-the-Old-Masters-on-Assessing-Equity-and-Efficiency-A-Primer-for-Fiscal-45289)"
  ],
  "alternates": {
    "markdown": "/en/blogs/articles/2017/10/03/inequality-tools-from-the-old-masters-to-help-todays-policymakers/index.md",
    "json": "/en/blogs/articles/2017/10/03/inequality-tools-from-the-old-masters-to-help-todays-policymakers/index.json",
    "bundleManifest": "/en/blogs/articles/2017/10/03/inequality-tools-from-the-old-masters-to-help-todays-policymakers/bundle-manifest.json"
  },
  "generatedAtUtc": "2026-08-27T19:38:35.462Z"
}