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 distributional issues to the top of the policy agenda. The challenge for many governments is to address concerns over rising inequality while simultaneously promoting economic efficiency and more robust economic growth. The book delves into this discussion by analyzing fiscal policy and its link with inequality. Country studies (on the Netherlands, China, India, Republic of Congo, and Brazil) demonstrate the diversity of challenges across countries and their differing capacity to use fiscal policy for redistribution. The analysis presented in the book builds on and extends work done at the IMF, and also includes contributions from leading academics.
"This collection of articles adds greatly to our understanding of the link between economic performance and inequality, combining theory, econometrics, and case studies, and looking at both taxes and expenditures. The questions are investigated in a huge range of circumstances—both developed and developing countries, at the national and subnational levels. The IMF recognizes that its policies can have huge distributive consequences and so this book will be important not only for guiding its own work, but for scholars and policymakers seeking to further enhance our understanding of the determinants of inequality and devising policies that might reduce it."
- Joseph E. Stiglitz, Columbia University
"This volume constitutes a definitive reference for serious students concerned with the redistributive role of the state, particularly in developing countries. Careful technical analyses back new ideas, especially on the tax side, for progressivity with minimal or no trade-off with revenue and growth: the unexploited relevance of income and property compared to indirect taxes, the centrality of such “administrative” issues as tax compliance, the still-minor role of wealth taxes, the risk of bilateral tax treaties for low-income countries. Nor are the authors naïve about the politics. Another terrific IMF contribution on how to tackle inequality within and across countries. I hope IMF operational staff pay heed."
- Nancy Birdsall, Center for Global Development
"In this engaging collection, leading experts address the distributional effects of an array of fiscal instruments. The revenue chapters span income, consumption, and property taxation, while the spending chapters tackle meanstested and contributory cash transfers, as well as expenditures on health and education. The authors consider the effects of fiscal policies in countries at diverse levels of economic development, and over a period of decades, with keen attention paid to recent rounds of fiscal consolidation. This vividly detailed yet accessible volume fills a void in the inequality literature, and promises to prompt lively debate about the consequences of fiscal policy."
- Janet C. Gornick, Luxembourg Income Study Cross-National Data Center & Graduate Center, CUNY