A Common Framework on Inequalities for G7 Countries
| Published date | 01 May 2018 |
| Author | Simone Martelli,Lawrence Bartolomucci,Simone Berardi |
| DOI | http://doi.org/10.1111/1758-5899.12538 |
| Date | 01 May 2018 |
A Common Framework on Inequalities for G7
Countries
1
Simone Martelli
Italy’s Ministry of Economy and Finance, and
CORE, Universit
e Catholique de Louvain
Lawrence Bartolomucci and Simone Berardi
Italy’s Ministry of Economy and Finance
Abstract
High and rising inequality has become one the defining challenges of our time, causing concerns among policymakers, espe-
cially in G7 countries. As a response, policy makers have adopted different strategies to address the issue. We argue that the
unsatisfactory results of this uncoordinated approach reflects a misunderstanding of the multidimensional nature of inequality
and of its main drivers. A common and coordinated framework among G7 countries, both individually and as a group, could
prove more effective in addressing inequalities.
Policy Implications
•G7 countries need to develop a common understanding on the drivers, trends and related policy implications to tackle
inequalities more effectively.
•A common framework on inequalities is developed as a new policy tool to bring together the economic and non-eco-
nomic dimensions of inequality and establish a link between the different dimensions of inequality and their key drivers.
•The framework on inequalities can inform G7 policy makers about relevant policy options, both at national and interna-
tional level.
•The recently agreed Bari Policy Agenda among G7 countries represents a first step forward to the design of a common
framework on inequalities.
•A greater effort by international organizations is required to improve the quality and comparability of available statistics
on the multiple dimensions of inequality, which would facilitate a joint understanding on the drivers, trends and policy
implications.
Since the turn of the century, the inequality issue has
become one of the most pressing policy challenges, notably
in G7 countries. Recent available evidence shows that, while
global inequality has fallen driven by a steady decline in
between-country income inequality, within-country inequal-
ity has risen substantially, notably in most wealthy econo-
mies (Milanovic, 2016). According to OECD data, since 1990s
average disposable income inequality (measured by the Gini
coefficient) has risen in the G7 as a group, reaching histori-
cal highs. The rise has been more marked in the US, Canada
and Germany, while the distribution of income in Italy, the
UK and Japan appears to have returned to the composition
registered in mid-1990s, albeit with considerable variance
over the period.
These trends have put policy makers under pressure, also
because income inequality is assumed to be negatively asso-
ciated with the strength and sustainability of economic
growth (Ostry et al., 2014). Moreover, high levels of inequal-
ity are assumed to have a negative impact on social
cohesion and political stability (IMF, 2014). A careful analysis
of the OECD Economic Surveys and IMF Staff Reports of Arti-
cle IV consultations for G7 countries for the period 2010–
2016 shows the mounting concern over the issue: the yearly
recurrence of the word ‘inequality’has grown rapidly from
2010 to 2013, to then stabilize at intermediate, but still
higher than recent historical standards, levels afterwards (Fig-
ure 1). In order to respond to this challenge, G7 economies
have followed different approaches to design country-speci-
fic policy actions to address the issue, with mixed results.
In this article, we propose a framework to comprehen-
sively analyse the multiple dimensions of inequality and
their main drivers. On this basis, consistent policy responses
can be designed by G7 countries, both individually and as a
group. The article is structured as follows: in section 1 we
show how the limited and mixed evidence on income
inequality trends requires a broader and multidimensional
approach to the inequality issue. In section 2 we identify
and analyse the multiple ‘domains’of inequality in G7
©2018 University of Durham and John Wiley & Sons, Ltd. Global Policy (2018) 9:2 doi: 10.1111/1758-5899.12538
Global Policy Volume 9 . Issue 2 . May 2018
216
Research Article
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