In the past two decades, low-income economies have seen a rise in growth, with fewer living in poverty. Yet inequality in many countries has remained virtually unchanged.
A recent IMF paper explains how the design of policies can matter to spread the economic benefits of growth more broadly.
Over the long haul, reforms can indeed yield bridges, banks, firms and fields of grain. But these take time, and the poorest cannot always wait for the transformation without additional help. Hence, in the short run, governments need to complement reform policies with redistribution. For example, they can use targeted cash transfers to farmers who suddenly lose a grain subsidy, a more progressive tax system to distribute burdens more fairly, or more accessible banking services.
You can read more here about how the necessary reforms can be tweaked or completed by measures to ensure a win-win for all in low-income economies:
- Blog by Christine Lagarde, Managing Director of IMF
- Staff note on macro-structural policies and inequality in low-income countries.