Growth-Equity Trade-offs in Structural Reforms

Abstract

IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

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

“…The note complements recent work on income inequality and growth-inequality trade-offs, including by Ostry, Berg, and Tsangarides (2014), the OECD (2015), and Ostry, Berg and Kothari (2016). It provides a more granular model-based analysis of the mechanisms through which reforms can result in growth-equality trade-offs and explores mitigating policy measures to address such trade-offs.…”

“…Societal views on whether a shift in the distribution of income is unwelcome will vary from country to country.5 For example, other reforms, such as capital account and trade liberalization, are also found to be associated with important growth-inequality trade-offs(IMF, 2015a;Ostry, Prati, and Spilimbergo, 2009;and Ostry, Berg and Kothari, 2016).©International Monetary Fund. Not for Redistribution…”

Finance & Development, June 2018

“…The reason is simple: rising inequality does not simply fall from the sky, nor is it caused entirely by technological change, which amounts to the same thing, since no one would seriously contemplate rolling back technical progress to curb inequality. Instead, as argued in Ostry, Loungani, and Berg (2018), it is driven to an important extent by the very policies that are the basic tools of the economist's trade (Ostry, Berg, and Kotharti 2018). These include not only macroeconomic policies (think of the progressivity of the tax system, or infrastructure spending, or even monetary policy in terms of its impact on the prices of assets held mainly by the rich), but also the kinds of supply-enhancing policies discussed above.…”

Finance & Development, June 2018

“…El motivo es simple: la intensificación de la desigualdad no es meramente fortuita, como tampoco es totalmente un producto del cambio tecnológico, lo cual equivale a lo mismo, dado que nadie pensaría seriamente en reducir el avance técnico para frenar la desigualdad. En cambio, según sostienen Ostry, Loungani y Berg (2018), está determinada en gran medida por las mismas políticas que son las herramientas básicas de la profesión de economista (Ostry, Berg y Kotharti, 2018). Estas comprenden no solo las políticas macroeconómicas (por ejemplo, la progresividad del sistema tributario o el gasto en infraestructura, o incluso la política monetaria en cuanto a su incidencia en los precios de los activos en manos de los ricos principalmente) sino también las políticas orientadas a aumentar la oferta antes mencionadas.…”