Enhancing inclusion

November 2023

Despite strong growth over the past two decades, income inequality remains high in many low-income countries (LICs). The ongoing COVID-19 crisis is disproportionally affecting people in already vulnerable situations and has spurred a renewed focus on the distributional issues. Studies have shown that high levels of inequality can impair the sustainability of growth as well as macroeconomic stability, thereby also limiting countries’ ability to achieve smooth recovery from the current crisis and reach the Sustainable Development Goals. Also, there has been a greater recognition that reducing gender gaps can have important economic benefits. Gender equality can play a key role in boosting productivity, enhancing economic resilience, and reducing income inequality. What follows is a brief description of how the topic and the work on enhancing inclusion has evolved over the three phases of the FCDO-IMF partnership on research on the macroeconomics of LICs.

  • Under phase 1 (March 2012 to March 2015), the research in phase 1 aimed to build distributional analysis into macroeconomic models and looking at the link between fiscal policy and income inequality. Some of the achievements under phase 1 include: a high-level conference on Fiscal Policy and Income Inequality in Sub-Saharan Africa. For a list of all the work produced under phase 1, see the reports for year 1, year 2, and year 3 of the FCDO-IMF partnership.
  • Under phase 2 (April 2015 to March 2017), the work on inequality focused on building and applying tools that describe and predict distributional consequences of macroeconomic policies, taking into account distributional factors. The work on gender—a new theme that was added in phase 2—was to place gender more squarely in the forefront of IMF policy-oriented research. A key achievement under phase 2 is the development of the macroeconomic and distributional analysis model (MDAM)—a framework to evaluate the distributional impacts of various macroeconomic policies—, which was applied to several countries, as summarized in a paper on Macro-Structural Policies and Income Inequality in Low-income Developing Countries. Also, a series of papers were produced on gender budgeting efforts on Asia, Caribbean and Pacifica Islands, Europe, Middle East and Central Asia, Sub-Saharan Africa, and Western Hemisphere. Conferences on Macroeconomic Policy and Income Inequality and on Gender and Macroeconomics fostered research discussions on these policy issues. For a list of all the work produced under phase 2, see the reports for year 4, and year 5 of the FCDO-IMF partnership.
  • Under phase 3 (April 2017 to March 2020), the research focused on issues related to inequality and gender as well as on their intersection. Training courses and greater dissemination of the work on inequality and gender was also offered. Some of the achievements under phase 3 include the applications of the inequality toolkit on Benin and Dominica; and the gender budgeting toolkit on Nigeria, Sri Lanka, and Rwanda, and an SDN on Women in the Labor Force: The Role of Fiscal Policies. Other achievements include a paper on the distributional effects of capital account liberalization; and high-level conferences on gender equality and inclusive growth. For a list of all the work produced under phase 3, see the report for year 6, year 7, and year 8 of the FCDO-IMF partnership.
  • Under the current phase—phase 4 (April 2020 to March 2025), we will look into gender equality and sustainable growth. Specifically, how the COVID-19 pandemic has affected gender inequality, what are the channels and trade-offs between different policies that can address country-specific gender gaps? Another area of work will look into quantifying the short-run and long-run welfare implications of revenue mobilizations using different tax instruments. For a list of all the work produced under phase 4, see the upcoming reports for years 9–13.

For a list of products that have been produced under each of the four phases of the FCDO-IMF partnership, see the box on outputs on the left-hand side.