Pursuing inclusive growth by João Tovar Jalles and Luiz de Mello published by VOXEU (10/2020)
“Widening income disparities and slow productivity growth in many countries have rekindled interest in the policies that can deliver strong and equitable growth in output and living standards. This column presents a chronology of inclusive growth episodes, defined as increases in GDP per capita without a concomitant deterioration in the distribution of household disposable income. These episodes are more likely to occur where human capital is high, tax-benefit systems are more redistributive, productivity grows more rapidly, and labour force participation is high. Trade openness and a range of institutional factors, including political system durability and electoral regimes, also matter.
The specific channels through which growth and income distribution are related are complex and often difficult to disentangle empirically. Of particular interest is the experience of countries that manage to sustain spells of uninterrupted output growth without a concomitant deterioration in the interpersonal distribution of income.
In fact, data from the World Bank World Development Indicators show that inclusive growth is not a rare event: between 1980 and 2013, there are 268 episodes of increases in GDP per capita without an associated deterioration in the distribution of household disposable income in the sample of up to 78 countries for which information is available. These episodes include, for instance, France between 1985 and 1989, Germany between 1995 and 1997, Brazil between 2004 and 2006, and India between 1998 and 2000.
When the distribution of income is considered worldwide rather than within countries, global output growth has been accompanied by a gradual reduction in global income inequality (Milanovic 2020)…”
