Economic Research: The Dismal Science finds poverty & inequality greater in U.S.

Poverty, inequality and redistribution

Focus

Jan 17th 2012, 20:27 by The Economist online

 Governments can reduce poverty and inequality through taxes and cash transfers. Successful programmes such as Progresa-Oportunidades in Mexico and Bolsa Família in Brazil have helped reduce poverty and inequality in the last couple of decades, but compared with rich countries, Latin American countries still fall short. According to a new report by the OECD, a club of mostly rich countries, Chile is the group’s most unequal member. It also finished third from the bottom, ahead only of Mexico and Israel, in relative poverty, measured by the share of the population earning less than half the median income. (Brazil fares even worse in both categories, but is not part of the OECD). Government spending on health, education and social policies is low, around 16% of GDP; the OECD average is around 27%. While the government has introduced Ingreso Ético Familiar, the new cash transfer programme only targets the extreme poor. More efficient and progressive taxes would raise revenues and reduce inequality. Tax evasion by corporations and individuals alone is estimated to cost the government some 2.5% of GDP. Chile’s economy grew by 6.6% last year, but will slow to around 4% this year. Better job opportunities and higher quality education are needed to improve labour productivity and boost growth.

Correction: An earlier version of the text said government social spending was much higher, this was in fact total spending. This was corrected on January 17th 2012. Sorry.

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http://www.economist.com/blogs/graphicdetail/2012/01/focus-2