The role of fiscal policy in income distribution

Achieving a pattern of income distribution that policymakers deem desirable and that is acceptable to society as a whole has been an objective of fiscal policy in its own right. This is because it favours social cohesion and political stability and enables the entire society to participate in the overall growth process of the economy, even if the contribution of different groups of the population varies. But achieving a pattern of income distribution that boosts growth and employment creation should also be considered an intermediate objective. For both reasons, it is essential for developing countries to carefully consider the way in which fiscal policies influence income distribution as part of their development strategies.

Related Subject(s): International Trade and Finance