- Benedict Clements, Ruud A. Mooij, Sanjeev Gupta, and Michael Keen
- Published Date:
- September 2015
Note to Readers
This 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.
The Table of Contents and Introduction are included in this excerpt and are taken from uncorrected page proofs. Please check quotations and attributions against the published volume.
Inequality and Fiscal Policy
Edited by Benedict Clements, Ruud de Mooij, Sanjeev Gupta, and Michael Keen
Pub. Date: September 2015
Formats: Digital; Print 7 x 10 in., 448 pp.
For information on how to order the full version of this book, please contact:
International Monetary Fund, IMF Publications
P.O. Box 92780, Washington, DC 20090, U.S.A.
Tel: (202) 623-7430 · Fax: (202) 623-7201
Copyright © 2015 International Monetary Fund
INEQUALITY and FISCAL POLICY EDITORS
Benedict Clements, Ruud de Mooij, Sanjeev Gupta, and Michael Keen
© 2015 International Monetary Fund
Joint Bank-Fund Library
Inequality and fiscal policy / edited by Benedict Clements, Ruud de Mooij, Sanjeev Gupta, and Michael Keen. - Washington, D.C. : International Monetary Fund, 2015. pages; cm
Includes bibliographical references and index.
1. Income distribution. 2. Fiscal policy. 3. Asia — Economic conditions. I. Clements, Benedict J. II. Mooij, Ruud A. de. III. Gupta, Sanjeev. IV. Keen, Michael. V. International Monetary Fund.
The views expressed in this book are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
978-1-51356-775-4 (hard cover)
Please send orders to
International Monetary Fund, Publication Services
PO. Box 92780, Washington, DC 20090, U.S.A.
Tel.: (202) 623-7430 Fax: (202) 623-7201
Benedict Clements, Ruud de Mooij, Maura Francese, Sanjeev Gupta, and Michael Keen
2 The IMF and Income Distribution
Benedict Clements, Vitor Gaspar, Sanjeev Gupta, and Tidiane Kinda
3 Inequality and Fiscal Redistribution in Advanced Economies
David Coady, Ruud de Mooij, and Baoping Shang
4 Fiscal Redistribution in Developing Countries: Overview of Policy Issues and Options
Francesca Bastagli, David Coady, and Sanjeev Gupta
5 Poverty and Distribution: Thirty Years Ago and Now
PART II ALTERNATIVE MEASURES OF INEQUALITY AND THEIR IMPLICATIONS FOR FISCAL POLICY
6 Functional Income Distribution and Its Role in Explaining Inequality
Maura Francese and Carlos Mulas-Granados
7 The Wealth of Nations: Stylized Facts and Options for Taxation
PART III FISCAL CONSOLIDATION AND INCOME INEQUALITY
8 Fiscal Consolidation and Inequality in Advanced Economies: How Robust Is the Link?
Davide Furceri, Joâo Tovar Jalles, and Prakash Loungani
9 Fiscal Consolidation and Income Inequality
Stefania Fabrizio and Valentina Flamini
PART IV TAX POLICY AND INEQUALITY
10 International Corporate Tax Spillovers and Redistributive Policies in Developing Countries
Ruud de Mooij, Thornton Matheson, and Roberto Schatan
11 Taxing Immovable Property: Revenue Potential and Implementation Challenges
12 Targeting and Indirect Tax Design
13 Carbon Tax Burdens on Low-Income Households: A Reason for Delaying Climate Policy?
PART V EXPENDITURE POLICY AND INEQUALITY
14 The Unequal Benefits of Fuel Subsidies Revisited: Evidence for Developing Countries
David Coady, Valentina Flamini, and Louis Sears
15 Equity Considerations in the Design of Public Pension Systems
Benedict Clements, Csaba Feher, and Sanjeev Gupta
16 The Redistributive Impact of Government Spending on Education and Health: Evidence from Thirteen Developing Countries in the Commitment to Equity Project
17 Income Inequality, Fiscal Decentralization, and Transfer Dependency
Caroline-Antonia Hummel and Mike Seiferling
PART VI COUNTRY CASE STUDIES
18 Reinventing the Dutch Tax-Benefit System: Exploring the Frontier of the Equity-Efficiency Trade-Off
Ruud de Mooij
19 Growing (Un)equal: Fiscal Policy and Income Inequality in China and BRIC+
Serhan Cevik and Carolina Correa-Caro
20 The Quest for the Holy Grail: Efficient and Equitable Fiscal Consolidation in India
Chadi Abdallah, David Coady, Sanjeev Gupta, and Emine Hanedar
21 A Path to Equitable Fiscal Consolidation in the Republic of Congo
Maximilien Queyranne, Dalia Hakura, and Cameron McLoughlin
22 Fiscal Adjustment and Income Inequality in Brazilian States
Joâo Pedro Azevedo, Antonio C. David, and Fabiano Rodrigues Bastos
Excessive income inequality in many parts of the world is one of the defining issues of our time. Not only is extreme income inequality a moral and political issue, but it has important macro-economic implications. There is growing evidence that excessive income inequality is detrimental to macroeconomic stability and economic growth.
I strongly believe that economic growth should be more inclusive and therefore more sustainable. This means improving the design of government tax and spending policies; enhancing financial inclusion, so that the poor have access to credit and financial markets; and promoting transparency and good governance, so that the doors of opportunity are open to all.
The topic of excessive inequality is relevant for the IMF in all three of its core activities— lending to support macroeconomic adjustment programs; macroeconomic surveillance, including related policy analysis; and technical assistance to build capacity, especially on government taxation and spending.
Fiscal policy is the government’s most powerful tool to achieve distributional objectives. Tax and spending policies must be designed wisely to minimize any adverse effects on incentives to work, save, and invest. On the revenue side, this implies building wider, more reliable tax bases by reducing exemptions, combating tax evasion, and strengthening administration. On the expenditure side, priorities include expanding access to education and health—which will bolster equality of opportunity—and better targeting of social benefits to the poor.
I hope this book will assist policymakers in designing more equitable fiscal policies that will help generate more equitable growth.
IMF advice has been mindful of the social impact of economic policies. Social spending floors are a key feature of programs supported under the IMF Extended Credit Facility for low-income countries. Measures to protect the most vulnerable have featured in IMF-supported programs with high-income members, including in the euro area. We are also addressing equity and social issues in our regular country-level economic surveillance, whenever they are macro-critical.
This book is designed to help further integrate income inequality issues into the IMF’s policy advice. I hope it will also spark further debate and research on this topic both inside and outside the IMF.
International Monetary Fund
This book has been a collective endeavor and has benefited from contributions from both inside and outside the IMF. We would like to thank the contributing authors for their close collaboration and enthusiasm for the topic. The research presented here has benefited from the comments of staff in the IMF’s Fiscal Affairs Department and other departments. Several chapters have also benefited from valuable comments presented at seminars hosted by other institutions.
Michael Harrup of the IMF’s Communications Department efficiently managed all aspects related to the production of the book, and we are grateful for his excellent work. We also thank Muriel Jolivert and staff in the Expenditure Policy Division of the IMF’s Fiscal Affairs Department for their valuable support. We are especially grateful to Maura Francese for her thoughtful analytical contributions and skillful organization of the many steps needed to bring a book to completion.
Ruud de Mooij