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Redistribution, Inequality, and Growth
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Redistribution, Inequality, and Growth

IMF Staff Discussion Note

Jonathan D. Ostry, Andrew Berg and Charalambos G. Tsangarides
IMF, 2014
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Editorial Rating

8

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  • Innovative

Recommendation

While the subject of income inequality gains headlines, real answers to the problem crash headlong into voters’ aversion to more taxes and bigger government. But economists at the International Monetary Fund take a practical look at new data that indicate the possibility of win-win solutions in addressing inequity while spurring growth. getAbstract recommends this timely investigation into the relationships among government redistribution, income inequality and economic growth to executives, policy makers and economists.

Summary

Traditional thinking about income inequality and economic growth presupposes a trade-off: Measures to reduce inequity, such as higher taxes on the rich and subsidies to the poor, might lessen each group’s motivation to work, resulting in some loss of economic activity. But research has yet to verify that trade-off. Some policies to ease inequality could benefit growth: Government spending on education and health benefits would increase workforce productivity, as would investments in public infrastructure.

Previous studies suggest that inequality results in weaker growth and leads to economic...

About the Authors

Jonathan D. Ostry, Andrew Berg and Charalambos G. Tsangarides are IMF economists.

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