Redistribution, Inequality, and Growth
Staff Discussion Notes, February 17, 2014
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Bibliographic details
- Authors: Jonathan David Ostry, Andrew Berg, Charalambos G Tsangarides
- Published: February 17, 2014
- Series: Staff Discussion Notes
- DOI: https://doi.org/10.5089/9781484352076.006
Summary findings
- The Fund has recognized in recent years that one cannot separate issues of economic growth and stability on one hand and equality on the other.
- There is a strong case for considering inequality and an inability to sustain economic growth as two sides of the same coin.
- The Fund has been cautious about recommending redistributive policies because such policies may themselves undercut economic efficiency and prospects for sustained growth (the so-called “leaky bucket” hypothesis written about by the famous Yale economist Arthur Okun in the 1970s).
- This SDN follows up the previous SDN on inequality and growth by focusing on the role of redistribution.
- It finds that, from the perspective of the best available macroeconomic data, there is not a lot of evidence that redistribution has in fact undercut economic growth (except in extreme cases).
- One should be careful not to assume therefore—as Okun and others have—that there is a big tradeoff between redistribution and growth; the best available macroeconomic data do not support such a conclusion.
Policy implications and interpretation
- Redistributive policies should not be assumed a priori to harm sustained economic growth except in extreme cases.
- Advice to member countries can incorporate redistribution concerns alongside growth and stability objectives, recognizing the empirical finding that a large tradeoff is not supported by macroeconomic data.
- Policymakers and advisors should weigh distributional goals against efficiency considerations but avoid blanket assumptions based on the “leaky bucket” hypothesis.
Publication and metadata
- Title: Redistribution, Inequality, and Growth
- Authors: Jonathan David Ostry, Andrew Berg, Charalambos G Tsangarides
- Publication date: February 17, 2014
- Series: Staff Discussion Notes No. 2014/002
- Issue: 002
- Volume: 2014
- Pages: 30
- DOI: https://doi.org/10.5089/9781484352076.006
- Stock No: SDNEA2014002
- ISBN: 9781484352076
- ISSN: 2617-6750
- Subjects: Fiscal redistribution, Income distribution, Income inequality, National accounts, Personal income
- Keywords: drives redistribution, Fiscal redistribution, Gini coefficient, Global, Growth, growth-inequality nexus, Income distribution, Income inequality, Inequality, inequality-growth relationship, market inequality, net inequality, Personal income, Redistribution, SDN, spell duration
Content based on the IMF Staff Discussion Note "Redistribution, Inequality, and Growth".
Content in this bundle
- sdn1402 - Executive Summary