Income Inequality Hurts Growth; Redistribution Doesn't

March 6, 2014

A new report from researchers from the International Monetary Fund (IMF) finds that not only is rising inequality a drag on economic growth, but that policies designed to lessen inequality through a moderate level of redistribution do not slow growth. While the report is clear in stating it isn't the official opinion or policy of the IMF, researchers Jonathan D. Ostry, Andrew Berg and Charalambos G. Tsangarides make a compelling case that austerity policies are bad for economic growth and that it isn't just morally sound to reduce income inequality, it's the economically wise choice, too. While countries have pursued policies focused heavily on deficit reduction and lower government spending, the new report suggests those legislative priorities may be the wrong approach to economic growth, joining a growing chorus of evidence from economic analysts that is pushing for a move away from austerity.

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