Economic Growth
Economic Policy Reforms 2012 Going for Growth © OECD 2012
PART II
Chapter 5
Reducing income inequality while boosting economic growth: Can it be done?
This chapter identifies inequality patterns across OECD countries and provides new analysis of their policy and non-policy drivers. One key finding is that education and anti-discrimination policies, well-designed labour market institutions and large and/or progressive tax and transfer systems can all reduce income inequality. On this basis, the chapter identifies several policy reforms that could yield a double dividend in terms of boosting GDP per capita and reducing income inequality, and also flags other policy areas where reforms would entail a trade-off between both objectives.
181
II.5.
REDUCING INCOME INEQUALITY WHILE BOOSTING ECONOMIC GROWTH: CAN IT BE DONE?
Summary and conclusions
In many OECD countries, income inequality has increased in past decades. In some countries, top earners have captured a large share of the overall income gains, while for others income has risen only a little. There is growing consensus that assessments of economic performance should not focus solely on overall income growth, but also take into account income distribution. Some see poverty as the relevant concern while others are concerned with income inequality more generally. A key question is whether the type of growth-enhancing policy reforms advocated for each OECD country and the BRIICS in Going for Growth might have positive or negative side effects on income inequality. More broadly, in pursuing growth and redistribution strategies simultaneously, policy makers need to be aware of possible complementarities or trade-offs between the two objectives. This chapter sheds new light on this issue, following up on recent OECD work (OECD, 2011). It first highlights differences in income inequality across the OECD and the factors driving them, such as cross-country differences in wage and non-wage income
PART II
Chapter 5
Reducing income inequality while boosting economic growth: Can it be done?
This chapter identifies inequality patterns across OECD countries and provides new analysis of their policy and non-policy drivers. One key finding is that education and anti-discrimination policies, well-designed labour market institutions and large and/or progressive tax and transfer systems can all reduce income inequality. On this basis, the chapter identifies several policy reforms that could yield a double dividend in terms of boosting GDP per capita and reducing income inequality, and also flags other policy areas where reforms would entail a trade-off between both objectives.
181
II.5.
REDUCING INCOME INEQUALITY WHILE BOOSTING ECONOMIC GROWTH: CAN IT BE DONE?
Summary and conclusions
In many OECD countries, income inequality has increased in past decades. In some countries, top earners have captured a large share of the overall income gains, while for others income has risen only a little. There is growing consensus that assessments of economic performance should not focus solely on overall income growth, but also take into account income distribution. Some see poverty as the relevant concern while others are concerned with income inequality more generally. A key question is whether the type of growth-enhancing policy reforms advocated for each OECD country and the BRIICS in Going for Growth might have positive or negative side effects on income inequality. More broadly, in pursuing growth and redistribution strategies simultaneously, policy makers need to be aware of possible complementarities or trade-offs between the two objectives. This chapter sheds new light on this issue, following up on recent OECD work (OECD, 2011). It first highlights differences in income inequality across the OECD and the factors driving them, such as cross-country differences in wage and non-wage income