Excerpt: Inequality and Fiscal Policy

Author: Mr. Benedict J. Clements, Ruud A. de Mooij, Mr. Sanjeev Gupta, and Mr. Michael Keen

Inequality is at the forefront of the economic policy debate in much of the world.

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Topics covered in this book

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Economics- Macroeconomics , Public Finance , MISC PUBS , Misc , , income , tax , spending , household income , tax-spending reform , transfer program , spending policy , income indicator , income distribution database , Organisation for Economic Co-operation and Development income distribution database , means testing , market income , high-quality growth , Organisation for Economic Co-operation and Development , Income inequality , Personal income , Income distribution , Global

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Summary

This paper is an excerpt from Inequality and Fiscal Policy. The sizeable increase in income inequality experienced in advanced economies and many parts of the world since the 1990s and the severe consequences of the global economic and financial crisis have brought issues on equity and distribution to the top of the policy agenda. The book delves into this discussion by analyzing fiscal policy and its link with inequality. Fiscal policy is the government’s most powerful tool for addressing inequality. It affects household consumption directly and indirectly. An important message of the book is that growth and equity are not necessarily at odds; with the appropriate mix of policy instruments and careful policy design, countries can in many cases achieve better distributional outcomes and improve economic efficiency. Country case studies demonstrate the diversity of challenges and the diverging ways to use fiscal policy for redistribution. The analysis presented in the book builds on work by IMF economists and leading academics.