Macro-Structural Policies and Income Inequality in Low-Income Developing Countries

By Stefania Fabrizio, Davide Furceri, Rodrigo Garcia-Verdu, Grace B Li, Sandra V Lizarazo Ruiz, Marina Mendes Tavares, Futoshi Narita, Adrian Peralta Alva

January 26, 2017

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Stefania Fabrizio, Davide Furceri, Rodrigo Garcia-Verdu, Grace B Li, Sandra V Lizarazo Ruiz, Marina Mendes Tavares, Futoshi Narita, and Adrian Peralta Alva. Macro-Structural Policies and Income Inequality in Low-Income Developing Countries, (USA: International Monetary Fund, 2017) accessed September 19, 2024

Disclaimer: This Staff Discussion Note represents the views of the authors and does not necessarily represent IMF views or IMF policy. The views expressed herein should be attributed to the authors and not to the IMF, its Executive Board, or its management. Staff Discussion Notes are published to elicit comments and to further debate.

Summary

Despite sustained economic growth and rapid poverty reductions, income inequality remains stubbornly high in many low-income developing countries. This pattern is a concern as high levels of inequality can impair the sustainability of growth and macroeconomic stability, thereby also limiting countries’ ability to reach the Sustainable Development Goals. This underscores the importance of understanding how policies aimed at boosting economic growth affect income inequality. Using empirical and modeling techniques, the note confirms that macro-structural policies aimed at raising growth payoffs in low-income developing countries can have important distributional consequences, with the impact dependent on both the design of reforms and on country-specific economic characteristics. While there is no one-size-fits-all recipe, the note explores how governments can address adverse distributional consequences of reforms by designing reform packages to make pro-growth policies also more inclusive.

Subject: Agricultural sector, Economic sectors, Income, Income distribution, Income inequality, National accounts, Taxes, Value-added tax

Keywords: Agricultural sector, Agriculture, Caribbean, Cash transfer program, Cost of capital, Financial inclusion, Financial sector reform, Growth, Higher-productivity sector, Income, Income distribution, Income fluctuation, Income inequality, Inequality in low-income developing countries, Infrastructure investment, Macro-structural policies, Productivity, Productivity gap, Rate, Resource mobilization, Revenue, SDN, Value-added tax

Publication Details

Pages:

42
Volume:

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DOI:

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Issue:

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Series:

Staff Discussion Notes No. 2017/001
Stock No:

SDNEA2017001
ISBN:

9781475566222
ISSN:

2617-6750

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