October 3, 2017

Unemployed day laborers in South Africa: the country has relatively high income, but also high inequality (photo: Rogan Ward/Newscom).

With inequality rising in many countries, policymakers need to choose the best fiscal policies that will help share the benefits of economic growth, and in so doing, make it more inclusive.

The early 20th century English economist Arthur Pigou, among others, saw economic welfare as influenced by both “the size of the national dividend” and “the way in which it is distributed among the members of the community.”

Fortunately, economists since then have developed tools that realized Pigou’s vision by combining a country’s total income and its distribution in a single measure of economic welfare. For example, Anthony Atkinson in the 1970s developed an easy-to-interpret measure expressed in a country’s currency, just like income.

Such tools are well known in academia but underutilized in policymaking. To encourage their greater use by policymakers, our new paper provides a refresher.

Considering inequality in measurement of economic welfare Den Rest des Beitrags lesen »