The gap between rich and poor keeps widening. Growth, if any, has disproportionally benefited higher income groups while lower income households have been left behind. This long-run increase in income inequality not only raises social and political concerns, but also economic ones. It tends to drag down GDP growth, due to the rising distance of the lower 40% from the rest of society. Lower income people have been prevented from realising their human capital potential, which is bad for the economy as a whole. This book highlights the key areas where inequalities are created and where new policies are required, including: the consequences of current consolidation policies; structural labour market changes with rising non-standard work and job polarization; persisting gender gaps; the challenge of high wealth concentration, and the role for redistribution policies.
- 21 May 2015
Inequality and fiscal redistribution in emerging economies
This chapter looks at income inequality and fiscal redistribution in emerging economies. The first part describes overall levels and trends in inequality as well as in social spending and taxation in selected emerging economies, comparing them to those typically recorded in the OECD area. It also highlights some prominent redistributive policies recently implemented in major emerging economies and OECD key partner countries. The second part of the chapter provides an in-depth analysis of redistribution in seven middle-income countries that are part of the Commitment to Equity (CEQ) project: Brazil, Chile, Colombia, Indonesia, Mexico, Peru and South Africa. Using a common method of fiscal incidence analysis, it examines the redistributive impact and effect on poverty of fiscal policy, comprising direct taxes, cash transfers, net indirect taxes and inkind benefits in the form of education and health services.