Fiscal Policy and Income Inequality

David Lipton, International Monetary Fund
Nancy Birdsall, Center for Global Development
Robert Z. Lawrence, Peterson Institute

Peterson Institute for International Economics, Washington, DC

March 13, 2014

The Peterson Institute for International Economics and the International Monetary Fund (IMF) cohosted the release of an important and timely new IMF paper titled "Fiscal Policy and Income Inequality" on March 13, 2014. IMF First Deputy Managing Director David Lipton presented the paper and its conclusions, followed by discussion from Nancy Birdsall, president of the Center for Global Development, and Robert Z. Lawrence, PIIE nonresident senior fellow.

Fiscal policy is the primary tool with which governments affect income distribution. Rising income inequality in both advanced and developing economies has coincided with growing public support for income redistribution. This comes at a time when fiscal restraint is an important priority in many economies. This paper helps contribute to the debate by assessing country experience with different fiscal instruments for redistribution. It also provides options for the reform of expenditure and tax policies to help achieve distributive objectives in an efficient manner that is consistent with fiscal sustainability.

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