Study Guide - LIMUN · Tableof&Contents& TableofContents&.....&1!

International Monetary Fund Executive Board (IMF)

Study Guide

Table of Contents Table of Contents ......................................................................................................................................... 1

Welcome Letter ............................................................................................................................................ 1

Introduction to IMF ..................................................................................................................................... 2 History ........................................................................................................................................................................ 2 Mandate ..................................................................................................................................................................... 4 Functions ................................................................................................................................................................... 5

Poverty reduction in low-‐income countries ....................................................................................... 7

Dissemination of Information & Research .......................................................................................... 7

Collaboration with the WB & WTO ........................................................................................................ 7 Governance & Decision-‐making ............................................................................................................. 8

Topic A: IMF response to the urgent needs of member states under armed conflicts with a special focus on Ukraine, particularly within the context of policy debate regarding austerity versus stimulus ......................................................................................................................... 9 Washington Consensus: ..................................................................................................................................... 11 Ukraine and austerity ........................................................................................................................................ 12 The Economy of Ukraine ................................................................................................................................... 12

Topic B: Income inequality through fiscal policy reforms ......................................................... 19

Measuring inequality .............................................................................................................................. 19 Trends of global inequality ................................................................................................................... 20

Economic effects of inequality ............................................................................................................. 21 How fiscal policy affects income inequality ..................................................................................... 24

Past IMF measures and policy analysis ............................................................................................. 27

Main issues to be addressed by delegates ........................................................................................ 32 Notes ............................................................................................................................................................. 33

Bibliography ............................................................................................................................................... 34

© London International Model United Nations 2015 LIMUN | Charity No. 1096197 www.limun.org.uk

1

Welcome Letter Dear Delegates, Congratulations on being selected by your teams for the most demanding and intensive of

committees at this prestigious conference! We expect nothing short of excellence from you. Having

been promised the cream of the crop from all teams present at this committee, we have decided to

challenge you with the most relevant and urgent topics in the international agenda at present. This

study guide should be your starting point for your research – Needless to say, there is much, much

more information available, which you can field in committee to your advantage. All committees

are judged by the quality of the resolutions they produce, and so it falls on you to be adequately

prepared.

We are pleased to be your chairs for the IMF this year. As one of the most powerful and

controversial organs of the international system, I hope you’ll take the chance to understand why in

today’s world money is power and how the international financial superstructure is at times more

relevant to geopolitics than aircraft carriers and tank columns.

Wishing you all the best, Felipe Cuello Marco Graziano


2

Introduction to IMF

History Before the international system was set up in the postwar era, countries attempted to implement

isolationist policies – barriers to trade, currency war and seizures of foreign currency from their

citizens. As public policy to relieve the Great Depression, they were fantastically counterproductive.

The decline in world trade exacerbated the crisis and destroyed the primitive globalization that had

been occurring until 1927. Employment and living standards tanked. Entire industries, newly bereft

of export markets, saw their business models collapse under the new conditions.

After the war the system of exchange rates and international payments was rebuilt under the aegis

of the World Bank group, including the IMF, enabling the resurgence of international trade. The

Bretton Woods accords established the rules of international trade to reduce volatility in currency

markets and providing stability for the businesses that chose to operate internationally.

Representatives of 45 countries came together in Bretton Woods, NH in the northeastern United

States and agreed on a framework for international economic cooperation. The IMF formally came

into being in December 1945, with 29 member states signing its Articles of Agreement.1 In 1947,

France, where much of the war had been fought – and hence where destruction was most grievous

– was the first country to borrow from the IMF, leading to the creation of the Marshall plan in

recognition of the precarious economic conditions in postwar Europe.


3

Figure 1: IMF governance structure. Taken from www.imf.org/external/about/govconstruct

Membership of the Fund expanded in the late 1950s and during the 1960s as the decolonization

movement (to which your colleagues in SPECPOL bear inheritance) many African countries, India

and newly independent nations in the Caribbean and Oceania applied for membership, mainly

former French and British colonies. However the new conflict between the Capitalist west and the

Communist east kept out Eastern European and communist south and East Asian countries from

the fund. Between 1945 and 1971, member states kept their currencies pegged to the dollar at a

fixed value, while the dollar was in turn pegged to gold.

In 1971, the Nixon administration suspended the convertibility of the dollar into gold, giving rise to

the current system of floating exchange rates. This change largely reflected the increasingly

dynamic nature of international trade and developments in economic theory, and is widely

considered one of the main economic events of world history.


4

Mandate The IMF is an independent international organization. Wholly owned by its member states, the

IMF’s objective is to promote world economic stability and growth. Member states are

shareholders in the fund, providing the IMF’s working capital through quota subscriptions. In

return, the IMF provides its members with macroeconomic policy analysis, financing in times of

balance of payments crisis, and technical assistance and training to improve national economic

management. The United Nations (UN) considers the IMF as a Specialized Agency

With which the UN has an established working relationship. As such, The IMF has permanent

observer at the UN. Article I sets out the mandate of the IMF as follows:

“To promote international monetary cooperation through a permanent institution which provides

the machinery for consultation and collaboration on international monetary problems;

To facilitate the expansion and balanced growth of international trade, and to contribute thereby

to the promotion and maintenance of high levels of employment and real income and to the

development of the productive resources of all members as primary objectives of economic policy;

To promote exchange stability, to maintain orderly exchange arrangements among members, and

to avoid competitive exchange depreciation;

To assist in the establishment of a multilateral system of payments in respect of current

transactions between members and in the elimination of foreign exchange restrictions that hamper

the growth of world trade;

To give confidence to members by making the general resources of the IMF temporarily available to

them under adequate safeguards, thus providing them with opportunity to correct maladjustments

in their balance of payments without resorting to measures destructive of national or

international prosperity; and


5

To shorten the duration and lessen the degree of disequilibrium in the international balances of

payments of members.”

Functions The IMF is multifaceted in its approach to achieving the goals set out in the mandate. For example:

Surveillance over Members’ Economic Policies

When a state becomes a member of the IMF, they agree to enact economic policy recipes in line

with the philosophy and aims of the IMF. They also give the IMF legal authority to enforce these

obligations. It is effectively the only organization in the world whose mandate includes the regular

examination of economic policy and circumstance of almost every nation on the planet.

Financing Temporary Balance of Payments Needs

The International Monetary Fund is, in a deep sense, just that: a fund. A pot of money with a

secretariat to manage it and a deliberative assembly of its investors to determine what to do with

the funds. Its purpose is to correct monetary imbalances -‐The Articles of Agreement empower the

IMF to assist member states that have a balance of payments crises (when they have to pay for

something today and won’t have the money until next year). By providing this temporary respite,

countries can more effectively plan their expenditures and refine their policy to avoid future

mistakes of this nature. If this sounds like the “Lender of last resort” role a central bank plays in the

national sphere, its because that’s exactly what the IMF is meant to do. Whereas in the national

sphere the Central bank has unlimited power to emit currency and avoid balance of payment crises

(bank runs and so on).


6

Figure 2: Value of an SDR. Taken from https://www.imf.org/external/np/tre/sdr/sdrbasket.htm

The IMF has a virtually limitless amount of “Special Drawing rights” which compose the fund itself.

Although the amount of SDR isn’t endless, like the power of a central bank to print its own

currency, there are enough SDR in the fund to bail out any member state of any currency crisis they

might be faced with. As per the table above, one SDR is roughly US¢66 (sixty-‐six cents), 11 pence,

12 yen and 42 eurocents. This basket adds up to about a US $1.50. However an SDR is not currency

in itself – its nature is a topic of much discussion among economists (is it credit? Is it money? It’s an

SDR!). Hence, when a country is experiencing a currency crisis or a balance of payments crisis (and

hence needs dollars/euros/yen/Pounds to shore up their own currency, or to pay whatever bill

sparked the balance of payments crisis). However there are controversial aspects to these bailouts,

namely the conditionalities, which we will discuss later.


7

Poverty reduction in low-‐income countries Contrary to structural adjustment plans or dealing with currency crises, which can sometimes

be rather harsh on the countries receiving them, The IMF also provides concessional loans to

low-‐income member countries (usually newer states like Kosovo or South Sudan) for these

countries’ governments to get going and in most other cases for fighting poverty. This is

usually coupled with efforts to engage the global investment community to participate in the

purchase of the member state’s bonds, humanitarian donations and the like. Under this aegis

we could also mention two debt relief initiatives the Fund spearheads: The HIPC (heavily

indebted poor countries) and MDRI (multilateral debt relief, whereby debt forgiveness and

cancellation are performed.

Dissemination of Information & Research Every employee of the IMF is either a Ph.D. in Economics or is well on their way to obtaining one.

As such, analysis of member states’ policies and statistical data isn’t limited to the forum of the IMF

itself. Country briefs are widely read, not just by other macroeconomists and central bankers but

also by the global financial community and investment class. “Public goods” databases are

maintained and regularly updated, providing a resource for other researchers around the world to

use in their work. The Board of Governors and Executive Board routinely commission studies from

this world-‐class secretariat of economic gurus.

Collaboration with the WB & WTO Two other bodies were created at Bretton Woods: The World Bank and the General Agreement on

Tariffs and Trade (GATT). While the GATT would have to wait 5 decades to come into full force as

an international deliberative institution (the WTO), it was instrumental in setting up the framework

of globalization and the re-‐establishment of multilateral trade deals as an instrument of economic

policy. If the IMF is the world’s Central bank, the World Bank is its finance ministry and the WTO its

trade department. Without going into great depth, as delegates you should consider appealing in


8

your resolution to actions by these other bodies to complement whatever strategy you decide to

implement.

Governance & Decision-‐making

The Fund’s managing director and secretariat are tasked with implementing the wishes of the

Board of Governors and the Executive Board (that’s you, delegate!). There are two committees

tasked with advising the governors and executives: the International Monetary and Financial

Committee (IMFC) and the Development Committee. This is where the economists of the fund work

and carry out the tasks which the deliberative bodies ask of them. While the Board of Governors is

technically the highest decision making body, it is rare for them to contradict the wishes of the

executives, much less the managing director and the rest of the secretariat. There is one Governor

and one Alternate governor for every one of the Fund’s 185 member states – they are tasked with

explaining to the secretariat any moves in the country’s monetary or fiscal policies.

Diplomatic skill is sometimes required – being the Governor for Argentina must be a challenge, for

example, having to sit in front of superior economists and keep a straight face while defending

whichever policy is being implemented after having been bailed out by the IMF so many times. In

sum, you must keep this structure in mind as you debate the issues at hand – harnessing the power

of the other parts of the fund will be key to solving the issues promptly and effectively.


9

Topic A: IMF response to the urgent needs of member states under armed conflicts with a special focus on Ukraine, particularly within the context of policy debate regarding austerity versus stimulus

I. Introduction

The relationship between Ukraine and the IMF begins with the fall of the Soviet Empire and the

nation’s accession to the Articles of Agreement in 1992. Relations were never very good, however,

as with many of the post-‐soviet states, highly illiberal policies were part of the deep economic

structure of the country. Despite receiving almost US$3 Billion by 1999, funds were frozen various

times for noncompliance with their monetary targets and commitments to reform the structure of

the economy. Though the IMF is notorious for slashing the share of GDP controlled by the state,

Ukraine proved to be impervious to its best efforts until the fall of Yanukovych’s government in

2014.

From then, the IMF has disbursed amounts to Ukraine second only to the Greek bailout during the

euro crisis. While the rule of thumb is to never disburse more than twice the amount of a country’s

quota to the IMF (annually), the US$18 Billion handed to Ukraine in 2014 was 8 times the amount

of its quota.

This situation is made even more egregious by the articles of agreement. As clause b of article 3 in

section V states:

“(b) A member shall be entitled to purchase the currencies of other members from the Fund

in exchange for an equivalent amount of its own currency subject to the following conditions:

• (i) the member’s use of the general resources of the Fund would be in accordance with the

provisions of this Agreement and the policies adopted under them;

• (ii) the member represents that it has a need to make the purchase because of its balance

of payments or its reserve position or developments in its reserves;


10

• (iii) the proposed purchase would be a reserve tranche purchase, or would not cause the

Fund’s holdings of the purchasing member’s currency to exceed two hundred percent of its

quota;

• (iv) the Fund has not previously declared under Section 5 of this Article, Article VI, Section

1, or Article XXVI, Section 2 (a) that the member desiring to purchase is ineligible to use the

general resources of the Fund.”2

The offenders here are points iii and iv – not only has Ukraine already been given an amount

exceeding 200% of its quota, but it is doubtful that a country in the grip of war against itself and a

power greater than itself will be able to pay down the debt any time soon, if ever.

To make matters worse, the IMF is still reeling in the scandal of having been too harsh on Greece:

an internal document was leaked to the press revealing that it was expected that Greece’s

unemployment rate wouldn’t surpass 15%. It is 25%. Hence the usual argument that the IMF is

fixing the country’s economy brings in another dimension to this problem. Since the foundation of

the IMF the expectation that loans would be repaid quickly was always part of the deal. It always


11

included a list of 10 policy requirements, known as the “Washington consensus” (cf. definition

below): fiscal discipline, reordering public expenditure, tax reform, interest rate liberalisation,

floating the exchange rate, liberalising trade rules, liberalising foreign investment rules, privatising

state owned assets, deregulating the markets and upholding property rights.

Washington Consensus:

Supported by prominent economists and international organisations (e.g., IMF, the World Bank, the

EU and the US), the Washington Consensus refers to a set of broadly free market economic ideas.

In essence, it “advocates, free trade, floating exchange rates, free markets and macroeconomic

stability”3. In order to determine policy towards economic development in South East Asia, Latin

America and other countries, the Washington Consensus was utilised.

Implications:

• IMF bailouts tended to involve free market reforms as a condition of receiving money.

• Belief in free trade suggests countries, should specialise in goods / services where they have a

comparative advantage. This may suggest that developing economies need to continue

producing primary products.

• Support of free trade through WTO and NAFTA (North Atlantic Free Trade Association) reduces

tariff barriers.

Overview:

In 1989, John Williamson’s ten principles, including the aforementioned ten sets of relatively

specific policy recommendations, have diverged from the original intention. Nevertheless,

regardless of the failings of the free market, there is still merit in considering each of the ten

principles. On the other hand, there needs to be greater discrimination and less blanket

implementation, for example, the privatisation of a state-‐owned car industry may be good, but

water supplies may not. Perhaps the most interesting development is the rise of the Indian and


12

Chinese economies, especially how the Chinese investment is playing a considerable role in

enabling economic development within developing economies.

The Washington Consensus is in part tied to the strength of the US economy, though the US

economy is likely to decline in relative terms4.

Ukraine and austerity

In the case of Ukraine, however, austerity cannot be imposed5. A war-‐torn country that is losing 3

provinces’ worth of tax receipts would surely collapse. Indeed many industries have instead been

nationalised rather than liberalised after the loans. Ukraine’s currency has already lost most of its

value and its doubtful that economic output will increase anytime soon, even if the war ended

tomorrow. The pretence of repayment is rather clearly fantastical.

However, it is also the first time the Fund has taken a side in a conflict such as this. Never before

has the IMF made loans to countries at war, or picked a side in civil wars. Economic considerations

must sometimes take second place to geopolitical ones – or rather, economics must act as an arm

of geopolitics. Indeed, the precedent of the Greek bailout is already set: the geopolitical aim of

keeping Greece in the Eurozone took precedence over the rulebook. The rulebook on austerity and

the Washington consensus policies could also be seen in this new way – it is more important to

ensure the survival of Ukraine than to ensure it raises its taxes by the right amount.

The exceptional nature of this situation is what led us to choose this topic for discussion.

The Economy of Ukraine

Since the 4th February 2015, the Ukrainian Hryvnia had collapsed by the 6th February by 50%6.

Evidently, as seen in the graph below, it has been falling for some time.


13

Ukraine has been mismanaged on a world-‐historical scale by oligarchs who, for decades, have

thieved and skimmed billions off the country's non-‐existent growth. As impossible as it seems,

Ukraine's economy has actually shrunk since the end of communism in 1991. Today, its war with

Russia is destroying the little that is left of the economy. It’ is not just that the rebel strongholds in

the factory-‐heavy industrialised east have deprived Ukraine of a quarter of its industrial capacity. It

is that it cannot afford to fight against what is still it's biggest trading partner—Russia. One does not

usually trade a lot with the country they are going to battle against, but Ukraine's economy is so

dependent on Russia's that it still trades more with it than any other country7. That means anything

that hurts Russia, such as lower oil prices or sanctions, just reflects on the Ukrainian economy, thus

burying it deeper in the financial hole.

In other words, Ukraine does not have a lot of foreign currency, and does not possess many ways to

earn more of it. Now Ukraine is fighting its biggest trading partner, whilst separatists have taken

refuge and confiscated its industrial heartland (Luhansk and Donetsk Oblasts).

Let us not forget that,the Ukrainian economy has been going down hill for a while-‐ with things

escalating when the Crimean conflict broke out early 2014 and the Maidan protests over

Yanukovych’s rule. In 2014 the hryvnia had already lost its value by half, and in the past week it has

collapsed by a further 50%. GDP is still shrinking.


14

Foreign-‐currency reserves fell by a

quarter in December 2014, leaving

just $7.5 billion-‐ the equivalent to

only five weeks’ worth of import

cover. The central-‐bank head talks

of a “full-‐blown financial crisis” 8 .

2015 promise $11 billion of debt

repayments, including a $3 million

Russian bond which falls due in

December 2015, but contains an

early-‐repayment provision if

Ukraine’s debt-‐to-‐GDP ratio

exceeds 60%. Bond yields are

soaring: Moody’s, a rating agency,

calls the chances of a Ukrainian default “exceedingly high”9.

Though official statistics are not out yet, the 60% limit has almost certainly been breached. Russia

states it can demand repayment, though it insists it does not want Ukraine to default. If Russia calls

the bond, other creditors could also demand immediate repayment. This debt is a useful

negotiating tool for the Kremlin. Ukraine needs more help: the EU is offering €1.8 billion ($2.1

billion); America is pledging $2 billion. Nevertheless, Ukraine’s financing gap for 2015 is estimated

at $15 billion. The war with the separatists wastes $10 million per day, according to Poroshenko-‐

the current president of Ukraine. And with the war escalating instead of abating, who knows how

much more Ukraine shall need to spend on its military.

The West’s hesitance to offer up more money is understandable, if one considers Ukraine’s

haphazard reform efforts. Politicians took a month to form a coalition government after the

October elections, which resulted in the IMF putting its programme on hold. Nevertheless, some

progress has been made, like simplifying the tax code. Nevertheless, energy remains unreformed.


15

The budget for 2015 was passed only at 4:30am on December 29th. Currently, the IMF is back in

the capital, Kiev, trying to revive its programme.

Domestic confidence in Ukraine’s leadership would be sapped if Ukraine defaults, roiling the

currency market again. George Soros, a financier, is arguing for aid before reforms and promoting a

$50 billion package. It is doubtful that this large sum shall be found, however Soros raises a

significant question regarding Ukraine’s importance, for the Ukrainian collapse would prove Putin’s

contention that Western promises mean very little and that “change in the post-‐Soviet world leads

only to pain”10.

II. Conditionalities

The latest review on conditionality produced by the IMF came out in 2011. While it stood firm in its

commitment to macro-‐economically vital issues (interest rates, exchange rates, etc) and to the

principles of fiscal conservatism, it also recognised that for the case of a country in need of deeper

reforms to labour markets (as a post-‐soviet economy would), the “Washington consensus” list of

conditionalities was no longer as critical as legal and structural reforms. The Fund realised that

taking a longer-‐term view, as opposed to a stopgap lender to smooth over yearly spikes in volatility,

was a better strategy. This approach to the Eurozone crisis provides the fund with more flexibility

with regards to Ukraine: supporting the Ukrainian state for a few years would guarantee repayment

of the loan much more effectively than any other measure, least of all denying them further credit

and letting them lose a war. In this conception the Fund will act more as an advisor on financial and

risk matters, provide macroeconomic policy advice and continue to support efforts to increase

investment and other needed measures to help stabilise Ukraine’s financial position. This may

include the provision of analysis on alternative policies, including some the IMF may not have

considered recommending. Indeed many countries are left with a high amount of debt after going

through IMF rescues – Greece being the prime example.


16

Indeed, the expression “throwing good money after bad” comes to mind: if the IMF can’t impose

conditionalities like the ones used during the East Asian and Latin American crises of the 1980s and

1990s, it is likely to be mainly because of the austerity vs stimulus debate. The Budget of Ukraine

was identified in an IMF policy paper as having a 15 Billion dollar shortfall11, which must be plugged

by international communities.

III. Bloc Positions and voting power

There are 24 Director groups in the Executive board. You, delegate, will represent the totality of

this group. For example, the director for the Nordic countries will represent the interests and

opinions of Sweden, Norway, Denmark, Finland, Latvia, Lithuania, Estonia, and Iceland, for a totality

of 3.4%12 of the voting power, which reflects their shares of the IMF’s funds. Other delegates will

hold single countries. The delegates from the USA, France, Japan, Russia, Saudi Arabia, the United

Kingdom, Germany and China will represent only one country. Bear in mind the interventions in the

IMF your countries have made, their domestic political situations and how they stand on the issue

of austerity vs stimulus and their geopolitical stances towards the situation in Ukraine.

USA – with 16.75% of the voting power it is the single largest shareholder of the Fund. It has been

instrumental in pushing through the extraordinary measures to aid the Ukraine and has been

disbursing loans and aid directly to Ukraine, Most recently in a financial assistance package worth

US$2Billion dollars13. For obvious reasons, it is likely to push for a greater loan package to the

Ukrainian government. They have reduced the budget shortfall from US$15 Billion to a mere US$13

Billion. They will be expected to lead a bloc pushing for increased budgetary assistance and lenient

conditions.

EU countries – although there is currently no single representative for the European Union their

stances can be taken as moving together, particularly given the European nature of the Ukraine

problem – the neighborhood policy and the Common Foreign and Defense Policy have come down

to Juncker pledging another US$2Billion to Ukraine14 this year from the EU, reducing the shortfall to

US$11 Billion. That should be the real target for the groups pushing for the loan. Put together,


17

France, Germany and the UK have 14.39% of the voting power (without counting the other 25 EU

members). Naturally, these delegates will have to act in concert to secure the granting of the loan

on friendly terms.

Russia – with a relatively paltry 2.39% of the vote, Russia will face an uphill battle in securing the

votes. It has the advantage of having all the rules on its side, and will possibly have more success in

arguing for reductions of quantity and harsher terms, although its opening position will naturally be

that too much money has already been handed to Ukraine and no more should be given. With the

Russian economy set to shrink by 5% this year15, Russia needs to ensure a favourable outcome for

themselves in these negotiations.

China – With a fairly respectable 3.81% of the vote, China has enough independence to vote

whichever way it likes. Given that its not part of any specific group, it will be one of the easier

pickups for either side of the debate. China is very much a believer in stimulus economics – their

stimulus package to counter the financial crisis amounted to 20% of Chinese GDP – and so is

unlikely to stick to austerity very strictly. Geopolitical reasons may impel it to vote one way or

another depending on the arguments of the blocs.

Japan – fielding 6.23% of the vote, Shinzo Abe’s Japan is also known for cooperating with the

Ukrainians – to the tune of US$300 Million, with an extra 16.3 million in grants.16 It is likely to vote

with the pro-‐loan side.

Saudi Arabia – another perennial ally of the west, the Saudis are known to engage in stimulus to

solve political crisis more than economic ones. Wielding 2.8% of the vote, it will probably be a good

regional ally in convincing the smaller Gulf States to vote with it.

Groups of countries – the rest of the vote – the “swing states” so to speak – are contained in the

various groupings. When thinking about what position to take, make sure to check which country in

your group has the largest share of votes, since they will surely vote more according to that

country’s preferences. The mainly Caribbean group of the Bahamas, St Kitts, etc also contains


18

Canada, which has more votes than the rest of the group put together. That delegate should

obviously follow Canada’s foreign policy priorities, not least because Belize doesn’t have any

foreign policy priorities.

Reference List 1 The articles of agreement are akin to a charter – you can find the articles at

https://www.imf.org/external/pubs/ft/aa/ 2 https://www.imf.org/external/pubs/ft/aa/#a5s3 3 http://www.economicshelp.org/blog/7387/economics/washington-‐consensus-‐definition-‐and-‐criticism/ 4 http://www.economicshelp.org/blog/7387/economics/washington-‐consensus-‐definition-‐and-‐criticism/ 5 http://www.bu.edu/pardeeschool/files/2015/01/Austerity-‐vs.-‐Stimulus-‐Working-‐Paper.pdf 6 http://www.washingtonpost.com/blogs/wonkblog/wp/2015/02/06/ukraines-‐currency-‐has-‐fallen-‐50-‐percent-‐in-‐two-‐days/ 7 http://www.washingtonpost.com/blogs/wonkblog/wp/2015/02/06/ukraines-‐currency-‐has-‐fallen-‐50-‐percent-‐in-‐two-‐days/ 8 http://www.economist.com/news/europe/21639565-‐without-‐lot-‐more-‐western-‐help-‐ukraine-‐faces-‐default-‐edge 9 http://www.economist.com/news/europe/21639565-‐without-‐lot-‐more-‐western-‐help-‐ukraine-‐faces-‐default-‐edge 10 http://www.economist.com/news/europe/21639565-‐without-‐lot-‐more-‐western-‐help-‐ukraine-‐faces-‐default-‐edge 11 http://www.bloomberg.com/news/2014-‐12-‐10/ukraine-‐bonds-‐slump-‐as-‐imf-‐said-‐to-‐see-‐15-‐billion-‐financing-‐gap.html 12 The full table of voting power we will use for substantive motions can be found at the following link. Please familiarize yourself with the countries you will represent, their stance towards the IMF, Ukraine and how many votes your group carries. https://www.imf.org/external/np/sec/memdir/eds.aspx 13 http://www.ft.com/cms/s/0/57a8fa5e-‐9b25-‐11e4-‐882d-‐00144feabdc0.html?siteedition=uk 14 http://www.ft.com/cms/s/0/3b5582fe-‐9739-‐11e4-‐845a-‐00144feabdc0.html 15 http://www.ft.com/cms/s/0/544e25d0-‐9fe6-‐11e4-‐9a74-‐00144feab7de.html?siteedition=uk 16 http://www.kyivpost.com/content/ukraine/ambassador-‐to-‐ukraine-‐japan-‐to-‐issue-‐300-‐million-‐loan-‐166-‐million-‐grant-‐to-‐ukraine-‐in-‐2015-‐377901.html


19

Topic B: Income inequality through fiscal policy reforms

Measuring inequality Income inequality has recently been under close watch from economists and policy makers

worldwide, who indicate it as one of the most relevant and pressing issues of the century. But what

is it exactly that is referred to as "inequality"?

Several measures have been developed to gauge the evenness of income distribution, the most

popular of which being by far the Gini coefficient.

It gauges inequality with respect to an ideal of equal income distribution in which all individuals

earn the same. The Gini coefficient ranges from 0, representing perfect equality, to 1. While a

perfectly equal society is possible, Gini coefficient of 1 can exist only as a theoretical proposition.

The maximum inequality possible for a sustainable society from a purely nutritional point of view

must permit the population to have at least a subsistence income. Throughout history, very few

societies ever exceeded a Gini coefficient of 0.6. [1]

The Gini coefficient is usually expressed on a scale out of 100, as in the following map.

Considering this drawback, a more significant measure of inequality is provided by the percentage

of maximum inequality possible given the level of total wealth of a country. Since the beginning of

the 20th century, inequality as expressed by this metrics has steadily declined. This holds even for

pre-‐tax income, showing that fiscal policy played no defining role in the trend.


20

However, this egalitarian trend must not be taken as a constant for the future. A number of studies

suggest that income inequality has plateaued at a historically low level, in spite of a slight reversal

experienced in the last 25 years in some of the most egalitarian nations, such as Sweden and

Denmark. However, in a wider perspective modern European nations are less unequal than in the

past. [2]

Trends of global inequality Until 1800 mean income, that is GDP per capita, did not exceed 1–5 subsistence, defined as 400 $

Purchasing Power Parity. While mean income is still at or just above subsistence level in some of

the poorest African nations, it has increased since 1800 in Europe, North America and elsewhere,

particularly since the half of the 20th century. However, the jury is still out on whether global

inequality has been decreasing, due to the different measures being used yielding widely different

results. An accurate study of world inequality should mirror the analysis of inequality within a

nation: it should include all citizens of all nations in the world, hence allowing us to gauge global

inequality.

There is no clear consensus as to whether global inequality has decreased, but there is at least

agreement that it has not increased.

The proposition that world income inequality has not increased since the 1970s may come as a

surprise, since it is often argued that it has continued to increase. However, that statement refers

to an inequality concept that is not very meaningful. If we take the income per head in each nation

and estimate Gini coefficients, then ‘un-‐weighted’ inequality, as it is usually called, has increased

since 1950, from about 0.45 to 0.55. This approach gives the per capita income of each nation the

same weight; Iceland, with a quarter of a million inhabitants, has the same weight as China or India.

Yet, it is beyond doubt that the size of the

economies matters when it comes to

obtaining a correct measure of global

inequality. By taking this in consideration, we

arrive at ‘weighted inequality’. By this metric,

we arrive at a decline in inequality: the global

weighted Gini coefficient falls from 0.55 to 0.5


21

since 1950. Therefore, we came to conclude that while the population-‐weighted measure indicates

a fall in world income inequality, the un-‐weighted one shows an increase. This is not unexpected

give the explosive rise in GDP per capita in populous nations such as India, China, Vietnam and

Indonesia. [3]

However, if we consider data over the last decade, income inequality appears to be on the rise in

advanced and developing economies alike. This phenomenon can be attributed to a vast array of

factors, such as globalisation and liberalisation of factor and product markets; skill-‐biased

technological change; increases in labor force participation by low-‐skilled workers; declining top

marginal income tax rates; increasing bargaining power of high earners; and the growing share of

high-‐income couples and single-‐parent households. [4]

Economic effects of inequality However, it was and still is highly debated whether inequality is indeed detrimental to economic

development and, if so, whether there is a necessary trade-‐between growth and inequality, with

developed countries being destined on a path of income disparity.

Empirical evidence seems to indicate that rising inequality can harm macroeconomic stability and

growth. Recent work points out the detrimental effects of high inequality on the pace and

sustainability of growth. Moreover, some researchers go as far as attributing to rising inequality

part of the causes of the global financial crisis.

Moreover, opinion polls suggest that wide income gaps are correlated with increasing public

expectations for redistributive action by governments, and more so in crisis-‐stricken countries. At

this time when public debt ratios in advanced economies are worryingly high and budgets in

developing economies appear more vulnerable, fiscal restraint came to be an important priority.

From this trends derive the pivotal role of sensitivity to distributional concerns in designing

consolidation packages.

Seen from this angle, income inequality is elevated to the status of crucial macroeconomic concern

for country authorities, and it is the Fund's responsibility to accordingly seek to understand the

macroeconomic effects of inequality. In addition, in its policy advice, the Fund should bear in mind

the effects of fiscal policy on redistribution and their consistency with the goals of country

authorities [5]


22

Moving on to specify the state of research on the links between inequality and the economy, it has

been found that higher rates of health and social problems, lower rates of social goods, lower level

of economic utility in society from resources devoted on high-‐end consumption, and even a lower

level of economic growth when human capital is neglected for high-‐end consumption are all

phenomena correlated to income gaps. In addition, in the 20 most industrialised countries, life

expectancy is lower in States where weighted inequality is higher.

British researchers Richard G. Wilkinson and Kate Pickett argue that rates of health and social

problems (obesity, mental illness, homicides, teenage births, incarceration, child conflict, drug use),

and lower rates of social goods (life expectancy by country, educational performance, trust among

strangers, women's status, social mobility, even numbers of patents issued) are found in countries

and states with higher inequality.

In their research, they also point out the links between inequality, social stratification and

worryingly high levels of psychosocial stress and status anxiety, in turn tightly correlated with

depression, chemical dependency, less community life, parenting problems and stress-‐related

diseases. [6]

Current and past academic work shows that income inequality and social cohesion inversely

correlate. In more equal societies, metrics of trust are significantly higher, as are measures of social

capital (the benefits of goodwill, fellowship, mutual sympathy and social connectedness among

groups making up social units). This link suggest that greater community involvement is likely in less

unequal countries, whereas homicide rates are consistently lower. [7]

Higher income inequality leads to a diminished of all social, cultural, and civic participation among

the less wealthy, with no evidence of substitution with less expensive forms of active social

participation.

Not only homicide, but crime in general tends to be less likely in countries characterised by a more

even income distribution also. Most researchers looking into the relationship have concentrated on

violent crimes, and more than fifty studies suggest tendencies for violence to be more common in

societies where income differences are larger.


23

From a more strictly macroeconomic viewpoint, income inequality lowers aggregate demand,

leading to more and more consumers, formerly classified as part of the middle class, being forced

to substantially cut back on luxury and essential goods and services. This has detrimental effects on

GDP and unemployment through reduced production and consumption, possibly exacerbating pre-‐

existing economic downturns.

Economists employed with the IMF have long argued that the effects of economic polarisation

stretch far beyond the short term. In fact, income and wealth inequality are inversely linked to

future mid-‐term and long-‐term GDP growth. Moreover, the consequent, strong demand for

redistribution is likely to put the country's finances under strain, while a larger share of the

population fails to have access to productive resources. Therefore, high inequality is a hindrance

not only to economic prosperity, but also to the stability of political institutions and to human

capital development. [8]

These findings, attributable to the work of David Castells-‐Quintana, substantiate the view according

to which unemployment, in itself an engine of inequality, is harmful to economic growth.

Unemployment must be dealt with as an integral part of income inequality, due to the strong

interconnection between the two.

Unemployment can hinder prosperity not only because leads to waste of human capital, but also

because it exacerbates redistributive pressures and subsequent distortions, is capable of pushing

people to poverty, constrains liquidity, limits labour mobility and erodes self-‐esteem, hence causing

social dislocation, unrest and conflict. [9]

Policies aiming at controlling unemployment and in particular at reducing its inequality-‐associated

effects support economic growth mainly through their combined action on these interlacing

phenomena and should therefore be carefully analysed by the Board.

Other pieces of work published by IMF economists A.J.Berg and D. Ostry show a strong connection

between inequality reduction and subsequent economic growth. Their findings suggest that,

among the factors driving the duration of growth spells in developed and developing countries,


24

income equality is not only beneficial, but more so than trade openness, sound political

institutions, or foreign investment considered as isolated variables. [10] Therefore a connection

between income equality and long-‐term growth does exist and must play a significant role in any

report on the phenomenon by the Fund.

Another view comes from the institutional school of Economics, particularly embodied by papers

from Alesina and Rodrik (1994) and Persson and Tabellini (1994). They developed a Political

Economics approach, arguing that inequality hurts development also through the institutional

channel. [11],[12] This is achieved by generating pressure to adopt redistributive policies that are

often ill-‐advised and geared towards a populist approach, hence producing an adverse effect on

investment (foreign and national) as well as GDP growth.

How fiscal policy affects income inequality Redistributive fiscal policies can affect private decisions in various ways, including decisions to seek

employment, to increase labor effort, and to save and invest. These, as previously stated, can

potentially influence both growth of economic activity, either positively and negatively. Given the

Fund’s mandate to promote growth and stability, it is important that the potential tradeoffs or

complementarities between fiscal redistribution and growth are well understood and taken into

account in the practice of the Board. In particular, there is a need to identify fiscal instruments

capable of reaching distributional objectives at a minimum cost, having in mind the concept of

economic efficiency.

In doing so, country experience, as discussed in the literature as well as in IMF technical reports,

should be widely referred to. [13]

Reducing inequality and poverty, and promoting equality are widely recognised as pivotal macro-‐

economic objectives. The recent trends that may point to a widening income gap between the rich

and poor have highlighted the need to tailor fiscal policy to accommodate for greater focus on

income inequality.


25

A crucial goal in the pursuit of effective policy is the achievement of both horizontal and vertical

equity. Horizontal equity is understood as a guideline for tax and benefits policy, whereby

individuals in the same financial brackets have the same fundamental ability to pay taxes, and,

therefore, should be taxed at the same rate.

On the other hand, the principle of vertical equity states that, when individuals are in different

circumstances and have different abilities to pay, they should not be taxed at the same rate, hence

causing a direct redistributive effect through increasing tax rates as income increases.

The vast majority of tax systems in developed countries tries to achieve both horizontal and vertical

equity. Income tax is calculated as a percentage of earnings, whereby the tax rate rises together

with income. Therefore individuals earning comparable incomes will be taxed at the same rate, and

those earning more or less will pay more or less tax not only in absolute value, but also as a

percentage of income. The system often implements tax brackets, with a tax-‐free allowance, so

that at very low income no tax is paid, and at very high income the upper tax band will apply. This

implies that a high-‐earning individual will both take advantage of the same tax-‐free allowance as a

lower-‐earning taxpayer, and pay progressively higher tax rates on increasing shares of her income

as it is allocated among tax brackets. In addition, governments can intervene to promote equity,

and reduce inequality and poverty, through the tax benefits system. This means employing a

benefits system which takes proportionately more tax from those on higher levels of income, and

redistributes welfare benefits to those on lower incomes.

The basis for redistribution is original pre-‐tax income, which will be adjusted in a number of ways

through the tax system in order to either increase or decrease post-‐tax earnings.

For example, often cash benefits are implemented so as to alleviate situations of extremely low or

zero original income.

Moreover, contributory and non-‐contributory benefits are in place in various fiscal systems.

Contributory benefits, such as pensions and job-‐seekers' allowance, entail individual contributions

to some incarnation of a national insurance fund.

On the other hand non-‐contributory benefits, such as housing benefit, income support, career

benefit and child support, do not require any previous contribution. Generally, means-‐testing is in

place in order to gauge the distribution of benefits that are hence handed out on a need basis.[14]


26

A powerful redistributive fiscal tool is income tax. It can present itself in a move or less progressive

fashion according to national policy decisions, but it is nevertheless adopted by the vast majority of

developed countries.

It is usually built according to rising ercentage taxes ranging from tax-‐free allowances for extremely

low incomes to rates exceeding 50% allocated to high incomes.

Direct taxes are especially popular with developed countries where redistributive pressure is the

highest and voters express a concern for inequality thus lobbying politicians for the introduction of

such measures that can cause the income gap to shrink. Moreover, direct taxes are generally more

effective in advanced economies due to higher GDP and hence a higher tax base from which they

can be levied.

In contrast, indirect taxes are characterised by a flat rate and generally refer to transaction. A

typical example of an indirect tax is the Value Added Tax, ultimately weighing on transactions

between final customers and retailers. This class of taxes is considered regressive because it is

applied regardless of income brackets and on general consumption goods such as foodstuffs,


27

liquors and tobacco. Therefore, as lower earners spend a larger share of income on such categories

of goods, indirect taxes weigh heavier on them, hence resulting in a regressive effect on income

distribution (i.e. they redistribute wealth towards high earners). Indirect taxes are the main source

of funding for developing economies due to their being widely applicable to necessary goods. This

allows government to levy large amount of taxes out of a population that does not display an

income high enough to constitute a sufficient tax base for income-‐tax prevalent financing.

Past IMF measures and policy analysis The Fund has long acknowledged the link between income distribution and fiscal policy. In the late

1980s a growing recognition and discussion of the potential effects of macroeconomic and

structural adjustment programs on poverty and inequality was initiated by the IMF and it was

followed by the implementation of dedicated structures.

These discussions highlighted the importance of social safety nets to protect the poor and

safeguard their access to essential public services, such as primary education and healthcare, hence

the call for dedicating substantive portions of government budgets to pro-‐poor programmes.

The International Monetary Fund published numerous reports on the topic if addressing income

inequality through fiscal policy. The most recent document, after recognising the pivotal role of

fiscal policy as the main tool through which income redistribution can be designed, issues

recommendations tailored to different classes of economies.

More recently, the line of work dedicated to fiscal policy and equality was revived and subsequently

expanded, coming include jobs and growth; the macroeconomic gains from greater gender equity,

and fiscal policies aimed at this goal, have also been covered in recent work. Current and future

analysis by the IMF should take into account recent trends in income distribution and the use of

redistributive fiscal instruments in both advanced and developing economies, with all the

differences that characterise them.

Common practices with respect to fiscal policies aimed at tackling inequality take on different

forms depending on the level of country development. Specifically, options for redistributive

policies that help maximise efficiency, in terms of their effects on incentives to work and save, are

listed below.


28

In advanced economies: gradual phasing out of benefits as incomes rise to avoid adverse effects on

employment; raising age limits for access to retirement in pension systems, with adequate

provisions for the poor whose life expectancy could be shorter; improving the access of lower-‐

income groups to higher education and safeguarding universal access to health services;

implementing progressive personal income tax (PIT) rate structures; and reducing regressive tax

exemptions.

On the other hand, in developing economies the following policies are currently broadly advised as

best practices: consolidating social assistance programs; introducing and expanding conditional

cash transfer programs to the poor while improving administrative penetration; expanding

noncontributory social pensions; improving access of low-‐income families to education and health

services; and expanding coverage of the progressive PIT. Innovative approaches, such as the

greater use of taxes on property and energy (such as carbon taxes) could also be considered in both

advanced and developing economies.

Furthermore, in 1999 the Fund established the Poverty Reduction and Growth Facility (PRGF), with

the objective of mainstreaming wealth redistribution in its lending operation. This organism used to

act by means of country-‐specific Poverty Reduction Strategy Papers, aimed at reflecting closely

each country's poverty reduction and growth priorities and, provided that macroeconomic stability

was safeguarded, seeking to adapt to changes in country circumstances and poverty reduction

objectives.

However, despite some facilities still remaining operational, since 2009 the PRGF has been replaced

by the Extended Credit Facility (ECF) currently extending credit with a zero interest rate and a

grace period of 5½ years, and a final maturity of 10 years. Conditionality of this lending is geared

towards macroeconomic policy monitoring, assessing metrics such as monetary aggregates,

international reserves, fiscal balances, and external borrowing coherently with the country’s

program objectives. ECF-‐supported programs aim to safeguard social and other priority spending,

recognised as crucial targets to tackle inequality. The programme's main aim is to grant the

maximum flexibility with respect to the countries' own social policy goal and it has been achieved

by allowing the program documents of countries that have a valid poverty reduction strategy paper


29

covering a year from the date of the program review to describe how the fiscal budget and the

planned structural reforms advance implementation of a country’s poverty reduction strategy. [15]

Although the IMF does not explicitly endorse any specific redistributive policy, in its latest

documents it does outline a policy framework including technical directives in order to effectively

address income inequality, acknowledged as significantly harming growth.

The Fund recognises that fiscal policy can achieve redistributive goals at minimal efficiency cost and

issues its recommendations accordingly.

Redistributive fiscal policy should be consistent with an appropriate level and composition of

public spending and fiscal sustainability. The optimal level of spending suggested by economic

theory is achieved when the social benefit gained by spending a unit of income equals the social

cost of financing this spending. Since this applies to each category of spending, for a given source of

financing, the social benefit of spending should also be equal across spending categories. This gives

rise to three orders of implications. First, the optimal level of redistributive spending will be

country-‐specific, as it depends on preferences and costs (including the efficiency costs of taxation).

Second, the benefits from additional spending on redistribution should be tested against the

benefits of decreased spending in other areas, such as public infrastructure, potentially causing

significant damage to growth. Third, redistributive fiscal policy should be consistent with the

viability of the national budget, a cardinal element of support for economic growth, and the

capacity to finance higher spending on redistribution over the longer term. Fiscal redistribution can

usually most efficiently be achieved either through direct instruments such as taxation or provision

of benefits gauged on income. In fact fiscal redistribution, by its very nature, consists of resources

from higher-‐income to lower-‐income households through taxes and transfers. [16]

On the tax side, personal direct income taxes, as already mentioned, are often preferable for

redistribution than indirect consumption taxes because they directly take account of the ability of

households or individuals to pay. Considering spending, it has been found that direct cash transfers

to poor households are usually superior to indirect methods such as price subsidies. Better


30

targeting of transfers reduces their burden on the national budget and the tax levels required to

finance them, thus achieving distributional objectives at a lower efficiency cost.

Another fundamental recommendation issued by the Fund is that the impact of tax and

expenditure policies on redistribution should be evaluated jointly. While it is true that both taxes

and spending can have redistributive implications, their relative trade-‐offs between efficiency and

redistribution will usually differ. Therefore, where the efficiency cost of redistribution through taxes

is relatively large, the IMF suggests that instead of achieving direct redistributive results, these

taxes should rather focus on raising revenue to finance other tools. For instance, an increase in

regressive taxes can still be the best approach to supporting redistribution if they finance public

expenditure of highly redistributive nature.

In the Fund's past papers, particular attention is devoted to means-‐tested programs, that is

schemes granting benefits conditional on need. The general consensus is to restrict eligibility or

benefit levels according to income in order achieve redistributive objectives at a lower cost by

avoiding the waste of resources implied by providing benefits to the entire population. These

programs should be implemented in a manner that avoids adverse effects on labor markets, so as

to encourage active job-‐seeking by the unemployed. This goal is commonly achieved by gradually

phasing out benefits as incomes rise.

However, means-‐testing can prove to be far from ideals in countries with a strong tradition of

universal benefit provision and the capacity to raise high levels of revenues in an efficient manner

with broad popular support.

In this cases the Fund has in the past suggested the use of tagging, a technique linking transfers to

characteristics that are strongly correlated with income. The more strongly correlated are the

characteristics with income or other characteristics of need, the lower the fiscal cost of achieving a

given amount of redistribution.

However, this tool leads to inefficiencies in the form of mis-‐coverage and under-‐coverage as

characteristics used as “tags” are only imperfectly correlated with need.


31

Therefore, when means-‐testing and tagging fail to reach their goals, additional programmes may be

needed to protect the excluded poor. Moreover, to be effective, tags should not be exposed to

opportunistic manipulation by households and should be easily verifiable. [17]

Another central topic is that of efficient revenue collection by means of indirect tax design.

Efficiency and costs of administration and compliance are typically adopted with the aim of

providing uniformity to broad-‐based consumption taxes and avoiding differential rates across

goods and services. Revenues collected via efficient indirect taxation can then finance progressive

spending.

The use of Fiscal policy is also advocated as a means to promote equality of opportunity and

greater intergenerational mobility. Spending focused on increasing access to education and health

can greatly improve social mobility and help stop transmission of disadvantage across generations,

while at the same time favouring the progressiveness of public spending. Moreover, improved

education and health outcomes among lower income groups will lower future income inequality

thus allowing a progressive tapering of redistributive measures.

The appropriate mix of direct and indirect measures will ultimately be conditional on administrative

capacity. The effective use of direct cash transfers and taxes imposes the prerequisite of a

government able to access information on individual incomes, as well as the administrative capacity

to process this information, collect taxes, and pay transfer benefits to households. When such

capacity is limited, as is the case in many developing economies, the focus should shift on indirect

instruments (such as tagging and progressive indirect taxes) in order to achieve redistribution. In

general, advanced and emerging economies will profit from a wider range of options, in particular

concerning expenditure.

Therefore, IMF policy recommendations are intrinsically tied to structural reforms of institutions,

especially for developing economies.

Another important implication of these considerations is that the economic costs of fiscal policy to

should be compared with other policy instruments, such as labor market regulations. Minimum


32

wages and employment protection regulations, for example, impose economic costs on the private

sector. However, the impact of minimum wages on inequality is ambiguous, with effects that cancel

each other out on the employment ratio and wage dispersion.

Even when effective at increasing wages for low-‐wage workers, they proved to be a rather

ineffective weapon against inequality, since they will accrue equally to non-‐poor households.

Given the ambiguous effects of direct wage and employment restrictions, fiscal instruments, such

as carefully-‐planned in-‐work benefits, yield in most cases positively superior results as far as

efficiency in redistribution is concerned

As a consequence, no effect of redistributive fiscal policies can be assessed separately from these

labour-‐market regulations. For example, in-‐work benefits will, in most cases, increase labour supply

and reduce low-‐skilled wages, skewing benefit incidence in favour of employers. This, in spite of

being an important example of possible drawbacks deriving from seemingly effective policies, has

been registered to occur when minimum wages are relatively low and do not impose an excessively

constrictive floor. [18]

Main issues to be addressed by delegates - Impact of inequality on economic growth and welfare. - Use of direct taxation as a redistributive tool. - Trade-‐off between fiscal solidity and redistributive spending. - Promotion of efficient redistributive expenditure. - Funding schemes for redistributive policies. - Conditionality of loans for income inequality reduction. - Assessment of results of current IMF facilities aimed at tackling inequality. - Labour market regulation and fiscal policy - Institutional reforms and inequali


33

Notes [1] Karl Gunnar Persson, “Economic History of Europe”, Chapter 11. [2] ibidem [3] ibidem [4] International Monetary Fund (Approved by Sanjeev Gupta), “Fiscal Policy and Income Inequality”, January 23 2014, Introduction. [5] International Monetary Fund (Approved by Sanjeev Gupta), “Fiscal Policy and Income Inequality”, January 23 2014, Introduction. [6] Kate Pickett and Richard J. Wilkinson, “The Spirit Level”. [7] ibidem [8] David Castells-‐Quintana and Vicente Royuela, "Unemployment and long-‐run economic growth: The role of income inequality and urbanisation", 2012. [9] ibidem [10] Andrew Berg and Jonathan Ostry, "Inequality and Unsustainable Growth: Two Sides of the Same Coin" IMF Staff Discussion Note No. SDN/11/08, 2011. [11] Alberto Alesina and Dani Rodrick, "Distributive Politics and Economic Growth", “Quarterly Journal of Economics”, May 1994. [12] Torsten Persson and Guido Tabellini, "Is Inequality Harmful for Growth?”, American Economic Review, 1994. [13] International Monetary Fund (Approved by Sanjeev Gupta), “Fiscal Policy and Income Inequality”, January 23 2014, Fiscal Redistribution. [14]http://www.economicsonline.co.uk/Managing_the_economy/Policies_to_reduce_inequality_and_poverty.html [15] https://www.imf.org/external/np/exr/facts/prsp.htm [16] International Monetary Fund (Approved by Sanjeev Gupta), “Fiscal Policy and Income Inequality”, January 23 2014, Design of Efficient Redistributive Fiscal Policy. [18] ibidem [19] ibidem


34

Bibliography Karl Gunnar Persson, “Economic History of Europe”. International Monetary Fund (Approved by Sanjeev Gupta), “Fiscal Policy and Income Inequality”, January 23 2014. Kate Pickett and Richard J. Wilkinson, “The Spirit Level”. David Castells-‐Quintana and Vicente Royuela, "Unemployment and long-‐run economic growth: The role of income inequality and urbanisation". Andrew Berg and Jonathan Ostry, "Inequality and Unsustainable Growth: Two Sides of the Same Coin". Alberto Alesina and Dani Rodrick, "Distributive Politics and Economic Growth", “Quarterly Journal of Economics”. Torsten Persson and Guido Tabellini, "Is Inequality Harmful for Growth?”. International Monetary Fund (Approved by Carlo Cottarelli), “Income Inequality and Fiscal Policy”, June 28 2012. Almas Heshmati, Jungsuk Kim, “A Survey of the Role of Fiscal Policy in Addressing Income Inequality, Poverty Reduction and Inclusive Growth”, April 2014.

Documents

Study Guide - LIMUN · Tableof&Contents& TableofContents&.....&1!