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.
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.
It is commonly agreed that economic policies, including budgetary policies, can have potentially strong distributional effects. Traditional economic analysis held that economic policies affected the income distribution primarily through their impact on the rate of growth. More recently, it has come to be recognized that qualitative aspects of economic growth are probably more important than the rate of growth itself. While recent research has confirmed the potential role of expenditure policies as a redistributive tool, it has also shown that redistribution does not necessarily have to come at the expense of economic growth and efficiency. Although there are substantial analytical and technical problems to be faced in the design of equitable and cost-effective public expenditure programs, unfavorable distributional outcomes of these programs can usually be traced more to political and institutional pressures than to purely technical factors.