Growth and equity
Income inequality revisited: Can one bring sense back into economic policy?
Economic policy should aim to reduce inequalities
Authors:
R. van der Hoeven
Publisher:
Institute of Social Studies, Netherlands, 2008
The importance of reducing inequities has become widely recognised as necessary for development. Yet a coherent set of policies to address income inequality has not. This speech reviews various themes on income inequality to show how academic analysis and debate can be strengthened to stem the growing tide of income inequality. In an accessible and clear manner, it deals with the five key questions:
- what do we mean by income inequality? Various ways inequality is defined are outlined
- why, despite various critiques, does it remain important to focus on income inequality?On both moral grounds as well as on analytical grounds the concern for income inequality and especially concern for growing income inequality is a proper concern
- which measures of income inequality are relevant? The recent phenomenon of growing inequality caused by top incomes may be picked up by the changes in the Gini ratio. However, one phenomenon that is not picked up by general inequality statistics is gender inequality
- how have we arrived at this growing income inequality?Reasons may include limited migration to developed nations; international financial flows have become less stable and more un-equalizing; and domestic policy and institutional reforms that had un-equalising effects
- what we could possibly do about it? Several empirical examples of good examples are provided. One key recommendations is to combine both objectives of raising employment and reducing income inequality in policy making
