Fiscal Redistribution Is Reduction In Income Inequality
Le and Coady 20 (Nghia-Piotr, David, University of California Berkely: BA in economics and political economy, Georgetown: Masters in public policy, economics and data analysis, David Coady is Lead Social Spending Expert at the Fiscal Affairs Department (FAD) in the IMF. Prior to joining FAD, he was a Research Fellow at the International Food Policy Research Institute and a Lecturer in Economics in the University of London. He earned his Ph.D. in economics from the London School of Economics in 1992. His research interests include development and public economics, and he has worked extensively on policy issues related to the efficiency and distributional implications of public policies including indirect taxes, public sector pricing, social spending, and the evaluation of safety net programs. “Designing Fiscal Redistribution: The Role of Universal and Targeted Transfers”, International Monetary Fund, June 26, 2020, https://www.elibrary.imf.org/view/journals/001/2020/105/article-A001-en.xml, Accessed July 21, 2023) // CD
Although increasing income inequality has been observed in many countries, the varying experiences across countries, with inequality even decreasing in a sizeable share of countries, suggests that public policy and institutions play and important role in determining such outcomes.2 In this respect, fiscal redistribution (i.e., the transfer of income from higher to lower income households via tax and transfer schemes) has a key role to play in addressing income inequality. For instance, evidence from studies of fiscal redistribution shows that over three-quarters of the difference in average disposable income inequality between advanced and Latin American countries (with the lowest and highest average disposable income inequality, respectively) is accounted for by differences in the extent of fiscal redistribution rather than by differences in market incomes (Bastagli, Coady and Gupta, 2015).