Why Education Policies Matter for Equality


Era Dabla-NorrisBy Era Dabla-Norris

Much of the debate on inequality focuses on its deleterious social and political effects and its impact on growth. But an equally important issue is what policies play a clear role in reducing income inequality.

The results of our new study suggest that improvements in education—even more than factors such as government expenditure or financial sector development—have contributed in an important way to reducing income inequality within countries.

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Back-to-School Blogs


By iMFDirect

As you trudge back to the office or cubie with a little sand still crunching in your backpack, you know the holiday is over. To help you catch up, here are some blogs to re-read to get you back into the swing of things.

Remember Europe? I thought so. The European Central Bank is center stage this week as inflation in Europe has hit a trough, which reminded me of our blog about deflation back in March that rattled a few cages.

Which brings us to what will or won’t happen with global interest rates, and their impact on well, pretty much everyone. We’ve analyzed the tea leaves so you don’t have to.

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Which Way the Wind Blows


Jeff Hayden altBy Jeff Hayden

You can call this edition of F&D magazine our Bob Dylan issue. It may seem odd for an economics magazine to draw inspiration from the legendary singer/songwriter, but one of his most famous lines, “The times, they are a-changin,’” reverberated through our corridors as we put together this special issue on the global economy’s past and future.

We weren’t humming the tune to pass the time. The lyrics seemed especially relevant to us this year, as we mark the 70th anniversary of the IMF and World Bank and the 50th anniversary of F&D. The world has seen a staggering amount of change in the past seven decades.

So, with these two anniversaries in mind and with Dylan’s ode to changing times in the air, we focused our attention on the transformation of the global economy—looking back and looking ahead. We wanted to address the question, what will the global economy look like in another 70 years?

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Meeting Rising Pressures to Address Income Inequality—A User’s Guide


By Sanjeev Gupta and Michael Keen

(Version in  EspañolFrançaisРусский中文 and 日本語)

These are difficult times for ministers of finance. Fiscal constraints are tight and raising economic growth a priority. At the same time, income inequality is on the rise, and so is public pressure for governments to do something about it through their tax and spending policies. What’s a minister to do? How can he or she meet these seemingly incompatible demands?

A new IMF paper provides some guidance. Governments, of course, will have their own equity objectives. What the paper aims to do is look at precisely how countries can achieve their distributional goals—whatever they are—at the least possible cost to (and maybe even increasing) economic efficiency. This can help achieve sustainable growth and, in many cases, lead to fiscal savings. An earlier study by IMF researchers found that on average, fiscal redistribution has been associated with higher growth, because it helps reduce inequality.

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Treating Inequality with Redistribution: Is the Cure Worse than the Disease?


By Jonathan D. Ostry and Andrew Berg

(Version in EspañolFrançaisPortuguêsРусский中文)

Rising income inequality looms high on the global policy agenda, reflecting not only fears of its pernicious social and political effects, (including questions about the consistency of extreme inequality with democratic governance), but also the economic implications. While positive incentives are surely needed to reward work and innovation, excessive inequality is likely to undercut growth, for example by undermining access to health and education, causing investment-reducing political and economic instability, and thwarting the social consensus required to adjust in the face of major shocks.

Understandably, economists have been trying to understand better the links between rising inequality and the fragility of economic growth. Recent narratives include how inequality intensified the leverage and financial cycle, sowing the seeds of crisis; or how political-economy factors, especially the influence of the rich, allowed financial excess to balloon ahead of the crisis.

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Support the People, Not Energy in the Middle East and North Africa


Masood AhmedBy Masood Ahmed

(Versions in عربي, 中文, Français, 日本語Русский, and Español)

Of all the regions in the world, the Middle East and North Africa region stands out as the one that relies the most on generalized energy subsidies. In energy-rich countries, governments provide subsidies to their populations as a way of sharing the natural resource wealth. In the region’s energy-importing countries, governments use subsidies to offer people some relief from high commodity prices, especially since social safety nets are often weak.

The question is: does this well-intended social protection policy represent the most efficient way to channel aid to the most vulnerable? The answer is no!

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Building on Latin America’s Success


Christine Lagarde

By Christine Lagarde

(Version in Español)

Next week, I will travel to Latin America—my second visit to the region since November 2011. I return with increased optimism, as much of Latin America continues its impressive transformation that started a decade ago.

The region remains resilient to the recent bouts in global volatility, and many countries continue to expand at a healthy pace. An increasing number of people are escaping the perils of poverty to join a growing and increasingly vibrant middle class.

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