Tackling inequality is not only a moral imperative. It is critical for sustaining growth.
Global income inequality has declined in recent years, with the Gini index — a statistical measure of income distribution with a value of zero indicating perfect equality — dropping from 68 in 1988 to 62 in 2013, reflecting relatively strong growth in many emerging and developing economies, particularly in China and India.
Here are several ways the International Monetary Fund (IMF) is helping countries assess and adapt their policies:
Calibrating Fiscal Policies. As a government’s primary mechanism for redistributing income across populations, fiscal policies are key to addressing inequality issues.
Protecting Social Spending and Increasing its Effectiveness. Reallocating resources away from ineffective spending programs, such as on fossil fuel subsidies, to effective social spending programs such as cash transfers, can strengthen social assistance, and help counteract the negative impact sometimes associated with needed economic reforms.
Balancing Labor Market Policies. In Poland, IMF staff advocated for policies that support structural transformation in the less developed eastern regions to reduce regional disparities and promote inclusive growth. A further study in 2015 focused on the relationship between labor market institutions and the distribution of incomes in advanced economies.
Read the full article about how the IMF is addressing global inequality at blogs.imf.org
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