Fiscal policy, redistribution and inequality in Africa

image of Fiscal policy, redistribution and inequality in Africa

Over the past five decades, substantial attention has been placed on the role of economic growth in reducing poverty. This is premised on the trickle-down effect of long-term economic growth on poverty and inequality, based on Simon Kuznets’ theory. However, evidence across the world has shown that high economic growth and rapid reduction in poverty do not automatically translate into accelerated reduction in inequality (Stiglitz, 2015; Reid-Henry, 2015; Piketty, 2015). China and Rwanda provide some good examples of the lack of trickle-down effect on inequality where rapid economic growth has been accompanied by rising income inequality. The global inequality crisis – where the richest 1 per cent of the world’s population has more wealth than the rest of the world combined – has disproved Kuznets’ theory and has further questioned the efficacy of fiscal policies in promoting economic efficiency and development effectiveness.

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