{ "title": "The Economics of Promoting Inclusive Growth", "sourceUrl": "https://www.imf.org/en/publications/fandd/issues/2018/06/economics-of-promoting-inclusive-growth-ostry", "canonical": "https://www.imf.org/en/publications/fandd/issues/2018/06/economics-of-promoting-inclusive-growth-ostry", "overlayPath": "/en/publications/fandd/issues/2018/06/economics-of-promoting-inclusive-growth-ostry/index.md", "summary": "New IMF research argues policymakers should pursue both economic growth and tackling widening inequalities together. To ensure sustainable growth, policymakers must promote inclusive policies.", "sections": [ { "heading": "Thesis and overview", "content": "- New IMF research argues policymakers should pursue both economic growth and tackling widening inequalities together.\n- To ensure sustainable growth, policymakers must promote inclusive policies rather than rely solely on supply-side reforms." }, { "heading": "Context and motivation", "content": "- The global economy was experiencing its broadest synchronized expansion since 2010 at the time of writing.\n- Economists historically emphasized supply-side measures (reducing barriers to entry, more flexible labor markets, liberalization, deregulation) as key to sustaining growth.\n- Structural reforms were found to confer sizable benefits for economic growth through: increased overseas capital investment, easier access to credit for local firms, reallocation of capital to more productive uses, improved credit ratings, and longer growth spells." }, { "heading": "Costs of inequality", "content": "- Since the global financial crisis of 2008, evidence suggests growth is more fragile and less resilient when gains accrue mainly to the wealthiest.\n- Mechanisms by which inequality undermines resilience:\n - Less social support for corrective policies after adverse shocks if short-term pain is not widely shared.\n - Unequal access to education, health care, nutritious food, credit markets, and the political process reduces overall resilience.\n- Empirical findings cited:\n - Work by Berg and Ostry (2017) found greater likelihood of severe downturns in countries with high or rising inequality in the years and decades before the crisis.\n- Concept introduced: macro-distributional view — policymakers should focus simultaneously on the size of the pie and its distribution." }, { "heading": "Macro-distributional linkages and economic risks", "content": "- Economists previously focused insufficiently on linkages between distribution and macroeconomic outcomes (macro-distributional linkages), analogous to earlier neglect of macro-financial linkages.\n- Risks include:\n - Secular stagnation (prolonged deficiency in aggregate demand) interacting with secular exclusion (growth accruing only to the top), creating a vicious cycle if median incomes stagnate and polarization intensifies." }, { "heading": "Implications for policy design", "content": "- Distributional effects are driven in part by policies that are core tools of economists, including macroeconomic policy settings, supply-enhancing reforms, and financial liberalization.\n- Policy design should assess impacts on both aggregate growth and distributional consequences.\n- Distributional consequences should inform reform design to:\n - Better balance winners and losers.\n - Increase political durability and legitimacy of reforms.\n - Reduce the risk that backlash will lead to protectionism or nationalist responses that undermine growth." }, { "heading": "Winners, losers, and political economy", "content": "- Reforms create winners and losers; opposition from losers can block reforms and reduce the political viability of reformers (political economy constraint noted by Jean-Claude Juncker).\n- Globalization similarly increases aggregate pie but can produce prolonged dislocation for some groups, fueling nativist or protectionist politics.\n- Remedies after the fact (redistribution via taxation and transfers) are possible but historically difficult to implement at the scale needed; therefore, preemptive design to mitigate distributional harms is preferable." }, { "heading": "Research on trade-offs and policy channels", "content": "- Recent work finds some structural reforms entail growth-equity trade-offs; for example, opening to cross-border capital flows tends to increase both growth and inequality.\n- Policy implication: do not abandon reforms because of distributional effects; instead, redesign reforms and complementary policies to better share gains.\n- One policy approach: ensure the domestic financial sector is inclusive and well regulated so benefits of external financial liberalization are broadly shared." }, { "heading": "Urgent policy priorities recommended", "content": "- Provide income support for workers displaced by technological change or trade, and offer incentives and opportunities to learn new skills.\n- Fiscal policy measures to safeguard political legitimacy of the growth model:\n - Ensure regulations are not skewed in favor of the wealthy.\n - Increase taxation of rents and estates.\n - Cooperate across jurisdictions to stem corporate tax avoidance, tax inversions, and use of tax shelters.\n- Strengthen financial market regulation to:\n - Prevent insider trading and money laundering.\n - Prevent unfair competition and crony capitalism across industry, services, and media.\n- Emphasize preemptive action in designing reforms and globalization to account for distributional effects rather than relying primarily on ameliorative measures afterward.\n- Principle articulated: Inclusive globalization need not be the same as unbridled globalization." }, { "heading": "Key references cited in the piece", "content": "- Berg, Andrew, and Jonathan D. Ostry. 2017. “Inequality and Unsustainable Growth: Two Sides of the Same Coin?” IMF Economic Review 65 (4): 792–815.\n- Ostry, Jonathan D., Andrew Berg, and Siddharth Kotharti. 2018. “Growth-Equity Tradeoffs in Structural Reforms.” IMF Working Paper 18/5.\n- Ostry, Jonathan D., Andrew Berg, and Charalambos G. Tsangarides. 2014. “Redistribution, Inequality and Growth.” IMF Staff Discussion Note 14/02.\n- Ostry, Jonathan D., Prakash Loungani, and Andrew Berg. 2018. Confronting Inequality: How Societies Are Free to Choose Inclusive Growth.\n- Ostry, Jonathan D., Prakash Loungani, and Davide Furceri. 2018. “Are New Economic Policy Rules Needed to Mitigate Rising National Inequalities?”\n\nSource: F&D Magazine article \"Growth or Inclusion?\" by Jonathan D. Ostry, June 2018.\n\n---\n\n Content in this bundle\n\n- النمو أم الشمول\n - النمو أم الشمول (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n - النمو أم الشمول (PDF){rel=\"external\" type=\"application/pdf\"}\n- ¿Crecimiento o inclusión? ● El dinero se transforma ● Finanzas y Desarrollo ● Junio de 2018\n - ¿Crecimiento o inclusión? ● El dinero se transforma ● Finanzas y Desarrollo ● Junio de 2018 (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n - ¿Crecimiento o inclusión? ● El dinero se transforma ● Finanzas y Desarrollo ● Junio de 2018 (PDF){rel=\"external\" type=\"application/pdf\"}\n- Croissance ou inclusion ?\n - Croissance ou inclusion ? (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n - Croissance ou inclusion ? (PDF){rel=\"external\" type=\"application/pdf\"}\n- The Economics of Promoting Inclusive Growth - IMF F&D Magazine\n - The Economics of Promoting Inclusive Growth - IMF F&D Magazine (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n - The Economics of Promoting Inclusive Growth - IMF F&D Magazine (PDF){rel=\"external\" type=\"application/pdf\"}\n- Рост или инклюзивность? – Финансы и развитие – июнь 2018 года\n - Рост или инклюзивность? – Финансы и развитие – июнь 2018 года (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n - Рост или инклюзивность? – Финансы и развитие – июнь 2018 года (PDF){rel=\"external\" type=\"application/pdf\"}\n- 增长还是普惠? - 金融与发展\n - 增长还是普惠? - 金融与发展 (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n - 增长还是普惠? - 金融与发展 (PDF){rel=\"external\" type=\"application/pdf\"}\n- Growth-Equity Trade-offs in Structural Reforms, WP/18/5, January 2018\n - Growth-Equity Trade-offs in Structural Reforms, WP/18/5, January 2018 (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n - Growth-Equity Trade-offs in Structural Reforms, WP/18/5, January 2018 (PDF){rel=\"external\" type=\"application/pdf\"}\n- sdn1402 - Executive Summary\n - sdn1402 - Executive Summary (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n - sdn1402 - Executive Summary (PDF){rel=\"external\" type=\"application/pdf\"}\n\n---\n\nSource: https://www.imf.org/en/publications/fandd/issues/2018/06/economics-of-promoting-inclusive-growth-ostry" } ], "bullets": [ "[Markdown version](/en/publications/fandd/issues/2018/06/economics-of-promoting-inclusive-growth-ostry/index.md)", "[Structured JSON version](/en/publications/fandd/issues/2018/06/economics-of-promoting-inclusive-growth-ostry/index.json)", "[Bundle manifest](/en/publications/fandd/issues/2018/06/economics-of-promoting-inclusive-growth-ostry/bundle-manifest.json)", "Authors: JONATHAN D OSTRY", "Published: June 1, 2018", "Volume: 55", "New IMF research argues policymakers should pursue both economic growth and tackling widening inequalities together.", "To ensure sustainable growth, policymakers must promote inclusive policies rather than rely solely on supply-side reforms.", "The global economy was experiencing its broadest synchronized expansion since 2010 at the time of writing.", "Economists historically emphasized supply-side measures (reducing barriers to entry, more flexible labor markets, liberalization, deregulation) as key to sustaining growth.", "Structural reforms were found to confer sizable benefits for economic growth through: increased overseas capital investment, easier access to credit for local firms, reallocation of capital to more productive uses, improved credit ratings, and longer growth spells.", "Since the global financial crisis of 2008, evidence suggests growth is more fragile and less resilient when gains accrue mainly to the wealthiest.", "Mechanisms by which inequality undermines resilience:", "Empirical findings cited:", "Concept introduced: macro-distributional view — policymakers should focus simultaneously on the size of the pie and its distribution.", "Economists previously focused insufficiently on linkages between distribution and macroeconomic outcomes (macro-distributional linkages), analogous to earlier neglect of macro-financial linkages.", "Risks include:", "Distributional effects are driven in part by policies that are core tools of economists, including macroeconomic policy settings, supply-enhancing reforms, and financial liberalization.", "Policy design should assess impacts on both aggregate growth and distributional consequences.", "Distributional consequences should inform reform design to:", "Reforms create winners and losers; opposition from losers can block reforms and reduce the political viability of reformers (political economy constraint noted by Jean-Claude Juncker).", "Globalization similarly increases aggregate pie but can produce prolonged dislocation for some groups, fueling nativist or protectionist politics.", "Remedies after the fact (redistribution via taxation and transfers) are possible but historically difficult to implement at the scale needed; therefore, preemptive design to mitigate distributional harms is preferable.", "Recent work finds some structural reforms entail growth-equity trade-offs; for example, opening to cross-border capital flows tends to increase both growth and inequality.", "Policy implication: do not abandon reforms because of distributional effects; instead, redesign reforms and complementary policies to better share gains.", "One policy approach: ensure the domestic financial sector is inclusive and well regulated so benefits of external financial liberalization are broadly shared.", "Provide income support for workers displaced by technological change or trade, and offer incentives and opportunities to learn new skills.", "Fiscal policy measures to safeguard political legitimacy of the growth model:", "Strengthen financial market regulation to:", "Emphasize preemptive action in designing reforms and globalization to account for distributional effects rather than relying primarily on ameliorative measures afterward.", "Principle articulated: Inclusive globalization need not be the same as unbridled globalization.", "Berg, Andrew, and Jonathan D. Ostry. 2017. “Inequality and Unsustainable Growth: Two Sides of the Same Coin?” IMF Economic Review 65 (4): 792–815.", "Ostry, Jonathan D., Andrew Berg, and Siddharth Kotharti. 2018. “Growth-Equity Tradeoffs in Structural Reforms.” IMF Working Paper 18/5.", "Ostry, Jonathan D., Andrew Berg, and Charalambos G. Tsangarides. 2014. “Redistribution, Inequality and Growth.” IMF Staff Discussion Note 14/02.", "Ostry, Jonathan D., Prakash Loungani, and Andrew Berg. 2018. Confronting Inequality: How Societies Are Free to Choose Inclusive Growth.", "Ostry, Jonathan D., Prakash Loungani, and Davide Furceri. 2018. “Are New Economic Policy Rules Needed to Mitigate Rising National Inequalities?”", "**النمو أم الشمول**", "**¿Crecimiento o inclusión? ● El dinero se transforma ● Finanzas y Desarrollo ● Junio de 2018**", "**Croissance ou inclusion ?**", "**The Economics of Promoting Inclusive Growth - IMF F&D Magazine**", "**Рост или инклюзивность? – Финансы и развитие – июнь 2018 года**", "**增长还是普惠? - 金融与发展**", "**Growth-Equity Trade-offs in Structural Reforms, WP/18/5, January 2018**", "**sdn1402 - Executive Summary**" ], "related": [ { "title": "النمو أم الشمول", "role": "document", "sourceUrl": "https://www.imf.org/-/media/files/publications/fandd/article/2018/june/ar/ostry.pdf", "summary": { "path": "/-/media/files/publications/fandd/article/2018/june/ar/ostry.pdf.md", "mime": "text/markdown" }, "binary": { "path": "/-/media/files/publications/fandd/article/2018/june/ar/ostry.pdf", "mime": "application/pdf" } }, { "title": "¿Crecimiento o inclusión? ● El dinero se transforma ● Finanzas y Desarrollo ● Junio de 2018", "role": "document", "sourceUrl": "https://www.imf.org/-/media/files/publications/fandd/article/2018/june/es/ostry.pdf", "summary": { "path": "/-/media/files/publications/fandd/article/2018/june/es/ostry.pdf.md", "mime": "text/markdown" }, "binary": { "path": "/-/media/files/publications/fandd/article/2018/june/es/ostry.pdf", "mime": "application/pdf" } }, { "title": "Croissance ou inclusion ?", "role": "document", "sourceUrl": "https://www.imf.org/-/media/files/publications/fandd/article/2018/june/fr/ostry.pdf", "summary": { "path": "/-/media/files/publications/fandd/article/2018/june/fr/ostry.pdf.md", "mime": "text/markdown" }, "binary": { "path": "/-/media/files/publications/fandd/article/2018/june/fr/ostry.pdf", "mime": "application/pdf" } }, { "title": "The Economics of Promoting Inclusive Growth - IMF F&D Magazine", "role": "document", "sourceUrl": "https://www.imf.org/-/media/files/publications/fandd/article/2018/june/ostry.pdf", "summary": { "path": "/-/media/files/publications/fandd/article/2018/june/ostry.pdf.md", "mime": "text/markdown" }, "binary": { "path": "/-/media/files/publications/fandd/article/2018/june/ostry.pdf", "mime": "application/pdf" } }, { "title": "Рост или инклюзивность? – Финансы и развитие – июнь 2018 года", "role": "document", "sourceUrl": "https://www.imf.org/-/media/files/publications/fandd/article/2018/june/ru/ostry.pdf", "summary": { "path": "/-/media/files/publications/fandd/article/2018/june/ru/ostry.pdf.md", "mime": "text/markdown" }, "binary": { "path": "/-/media/files/publications/fandd/article/2018/june/ru/ostry.pdf", "mime": "application/pdf" } }, { "title": "增长还是普惠? - 金融与发展", "role": "document", "sourceUrl": "https://www.imf.org/-/media/files/publications/fandd/article/2018/june/zh/ostry.pdf", "summary": { "path": "/-/media/files/publications/fandd/article/2018/june/zh/ostry.pdf.md", "mime": "text/markdown" }, "binary": { "path": "/-/media/files/publications/fandd/article/2018/june/zh/ostry.pdf", "mime": "application/pdf" } }, { "title": "Growth-Equity Trade-offs in Structural Reforms, WP/18/5, January 2018", "role": "document", "sourceUrl": "https://www.imf.org/-/media/files/publications/wp/2018/wp1805.pdf", "summary": { "path": "/-/media/files/publications/wp/2018/wp1805.pdf.md", "mime": "text/markdown" }, "binary": { "path": "/-/media/files/publications/wp/2018/wp1805.pdf", "mime": "application/pdf" } }, { "title": "sdn1402 - Executive Summary", "role": "note", "sourceUrl": "https://www.imf.org/external/pubs/ft/sdn/2014/sdn1402.pdf", "summary": { "path": "/external/pubs/ft/sdn/2014/sdn1402.pdf.md", "mime": "text/markdown" }, "binary": { "path": "/external/pubs/ft/sdn/2014/sdn1402.pdf", "mime": "application/pdf" } } ], "alternates": { "markdown": "/en/publications/fandd/issues/2018/06/economics-of-promoting-inclusive-growth-ostry/index.md", "json": "/en/publications/fandd/issues/2018/06/economics-of-promoting-inclusive-growth-ostry/index.json", "bundleManifest": "/en/publications/fandd/issues/2018/06/economics-of-promoting-inclusive-growth-ostry/bundle-manifest.json" }, "generatedAtUtc": "2026-09-15T03:36:26.918Z" }