## Causes and Consequences of Income Inequality: A Global Perspective

_Staff Discussion Notes, June 15, 2015_

## Source details

**Canonical URL:** [Causes and Consequences of Income Inequality: A Global Perspective](https://www.imf.org/en/publications/staff-discussion-notes/issues/2016/12/31/causes-and-consequences-of-income-inequality-a-global-perspective-42986)

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## Bibliographic details
- Authors: Era Dabla-Norris, Kalpana Kochhar, Nujin Suphaphiphat, Franto Ricka, Evridiki Tsounta
- Published: June 15, 2015
- Series: Staff Discussion Notes

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### Summary
- Paper analyzes the extent of income inequality from a global perspective, its drivers, and policy responses.
- Key high-level finding: increasing the income share of the poor and the middle class increases growth, while a rising income share of the top 20 percent results in lower growth.
- Implication: when the rich get richer, benefits do not trickle down; policies should be country specific and focus on raising the income share of the poor and preventing hollowing out of the middle class.
- Regional policy emphasis:
  - Emerging and developing countries: financial inclusion is imperative.
  - Advanced economies: focus on raising human capital and skills and making tax systems more progressive.

### Drivers of Inequality (as identified)
- Skill premium associated with technical change and globalization.
- Weakening protection for labor.
- Lack of financial inclusion in developing countries.
- Drivers vary widely across countries; common drivers include those listed above.

### Findings on Growth and Distribution
- Increasing income share of the poor and the middle class: associated with higher growth.
- Increasing income share of the top 20 percent: associated with lower growth.
- Conclusion: benefits do not automatically trickle down from top income groups to the rest of the population.

### Policy Recommendations
- Adopt country-specific policies that:
  - Raise the income share of the poor.
  - Ensure there is no hollowing out of the middle class.
- For emerging and developing countries:
  - Prioritize financial inclusion to reduce inequality.
- For advanced economies:
  - Prioritize raising human capital and skills.
  - Make tax systems more progressive.

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_Source: https://www.imf.org/en/publications/staff-discussion-notes/issues/2016/12/31/causes-and-consequences-of-income-inequality-a-global-perspective-42986_