Inequality and Unsustainable Growth: Two Sides of the Same Coin?

April 8, 2011

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Jonathan David Ostry, and Andrew Berg. Inequality and Unsustainable Growth: Two Sides of the Same Coin?, (USA: International Monetary Fund, 2011) accessed November 22, 2024

Disclaimer: This Staff Discussion Note represents the views of the authors and does not necessarily represent IMF views or IMF policy. The views expressed herein should be attributed to the authors and not to the IMF, its Executive Board, or its management. Staff Discussion Notes are published to elicit comments and to further debate.

Summary

This note raises the IMF’s profile on a number of issues related to inequality, unemployment, governance, etc. It builds on earlier empirical work that examined correlations between growth downbreaks/duration of growth spells and a range of macro/policy/institutional factors. This paper is designed to be more accessible, more policy oriented, and focused squarely on the issue of inequality and the sustainability of growth. It will reference the literature that has gained prominence in the wake of the global crisis, and the possible links between the crisis and rising inequality in countries at the epicenter of the crisis. The analytical findings will also be connected to real world policy narratives in certain countries, to provide texture to the results and enhance policy relevance. The paper will argue that, based on the empirical findings, more equality in the income distribution is associated with longer-lived growth spells. Broad redistributive policies are not necessarily pro-growth, however, as these can have strong disincentive effects. The paper’s policy discussion is appropriately cautious, therefore, offering only tentative ideas, for example, active labor market policies and more attention to human capital investments designed to avoid conflicts between efficiency and equity perspectives.

Subject: Income distribution, Income inequality, National accounts, Personal income, Poverty, Poverty reduction strategy

Keywords: A number of country, Asia and Pacific, Distribution channel, FDI inflow, Financial crisis, Global, Growth spell, Income distribution, Income inequality, Income inequality database, Inequality-reducing policy, Market economy, Middle East, Personal income, Policy conclusion, Policy implication, Policy inaction, Poverty reduction strategy, Real GDP, SDN, State repression, Structural adjustment, Sub-Saharan Africa, Sustainable growth, Wider World income inequality database

Publication Details

Pages:

20
Volume:

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DOI:

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Issue:

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Series:

Staff Discussion Notes No. 2011/008
Stock No:

SDNEA2011008
ISBN:

9781463926564
ISSN:

2617-6750

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