Fiscal Policy and Income Inequality

Policy Papers, January 23, 2014

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Fiscal Policy and Income Inequality

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Bibliographic details

• Published: January 23, 2014
• Series: Policy Papers

Overview

• 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 trend occurs at a time when fiscal restraint is an important priority in many advanced and developing economies.
• The paper does not advocate any particular redistributive goal or policy instrument for fiscal redistribution.

Main topics covered

• (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.
• (iv) Recent evidence on how fiscal policy measures can be designed to mitigate the impact of fiscal consolidation on inequality.

Key findings and emphases

• Fiscal policy is central to redistribution and addressing inequality across countries at different stages of development.
• There is growing public support for redistribution amid rising inequality in both advanced and developing economies.
• Fiscal restraint in many countries constrains redistributive policy choices and raises trade-offs between equity and fiscal sustainability.
• The paper compiles evidence and country experiences rather than prescribing a single redistributive target or preferred instrument.

Policy options and analytical focus

• Assessment of tax policy reforms aimed at distributive objectives while maintaining fiscal sustainability.
• Review of expenditure reforms, including social safety nets, to improve equity and efficiency.
• Evaluation of how fiscal consolidation can be designed to mitigate adverse distributional effects.

Subjects covered

• Developed countries
• Developing countries
• Fiscal consolidation
• Fiscal policy
• Fiscal reforms
• Government expenditures
• Income distribution
• Social safety nets

Fiscal Policy and Income Inequality, (USA: International Monetary Fund, 0) accessed 9/9/2026

Content in this bundle

• Fiscal Policy and Income Inequality; IMF Policy Paper; January 23, 2014
  • Fiscal Policy and Income Inequality; IMF Policy Paper; January 23, 2014 (Markdown version)
  • Fiscal Policy and Income Inequality; IMF Policy Paper; January 23, 2014 (PDF)