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Development and Ecological Economics session at 12th International Conference
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Asset-Centred Redistributive Policies forSustainable Development
Pierre KohlerUnited Nations - DESA/DPAD/DSP, New York
September 25, 2014
CONTEXT
I UNDESA/DPADI World Economic and Social Survey 2014 on “Reducing
Inequality for Sustainable Development”I Basic motivation for looking at redistributive policies/this
paperI The growing concentration of wealth and income stands in
sharp contrast with the increasingly cooperative nature ofwealth production and creation processes
I Eradicating poverty without reducing inequality is impossible inour finite world
I Policy solutions need to simultaneously address issues ofresource allocation, income distribution and the scale of theeconomy
I Redistributive policies are part of any solution
PROPOSED APPROACH
I Most analyses/policiesI “Redistributive policies” = “fiscal policies”I Focus on income flowsI Overall objective: economic growth
I This paper proposes an alternative stock-flow approach toredistributive policies that encompasses income flows, butwhich is centred on the stock of income-generating assets
I Focus on income-generating assets better reveals blindspotswith regard to economic efficiency and, especially, social equityand environmental sustainability
I Overall objective: sustainable development
OBJECTIVES OF THE PAPER
I Propose an asset-centred analytical model of redistributivepolicies explaining why stocks of income-generating assets(e.g. human capital and wealth, including natural resources)matter for in-equity and un-sustainable development
I Review set of existing policiesI Make policy recommendations based on the comparison of
existing policies with the potential scope of redistributivepolicies
PAPER OUTLINE -Asset-Centred Redistributive Policies for SustainableDevelopment
1. REDISTRIBUTIVE POLICIES, IN-EQUITY ANDUN-SUSTAINABLE DEVELOPMENT1.1 An asset-centred analytical framework1.2 Stylized facts about redistributive policies and linkages to
in-equity and un-sustainable development2. REDISTRIBUTIVE POLICY TRENDS IN A CHANGING
CONTEXT2.1 Public expenditures and social spending2.2 Revenue mobilization
3. TOWARDS PROGRESSIVE ASSET-CENTEREDREDISTRIBUTIVE POLICIES FOR SUSTAINABLEDEVELOPMENT3.1 Definitions3.2 Institutions and policies3.3 International cooperation
AN ASSET-CENTRED ANALYTICAL FRAMEWORK
Two analytical figures:1. Private income-generating assets, redistributive policy
instruments and the income cycle2. Public income-generating assets and the revenue-expenditure
cycleQuestions:
I What are those two cycles? Who owns what? And what is therole of income-generating assets?
I How are those two cycles linked?I What are the linkages to in-equity and un-sustainable
development?
Figure: Private income-generating assets, redistributive policyinstruments and the income cycle
Figure: Public income-generating assets and the revenue-expenditurecycle
LINKAGES TO IN-EQUITY AND UN-SUSTAINABLEDEVELOPMENT
Stylized facts and linkages:I The declining impact of redistribution and rising income
inequality at the global levelI Redistribution of income and in-equality of outcomeI Redistribution of income-generating assets and in-equality of
opportunityI Human capitalI Wealth
I Redistributive policies and the un-sustainable use andun-equitable access to natural resources for present and futuregenerations
Figure: The declining impact of redistribution and rising incomeinequality at the global level
02
46
8In
crea
se in
Gin
i net
sin
ce 1
970
(in p
oint
s)
3035
4045
5055
Gin
i ind
ex (i
n po
ints
)
1970 1980 1990 2000 2010year
Gini net (LHS) Gini market (LHS) Increase in Gini net since 1970 (RHS)
I 7 points increase, 75 per cent of world populationI Limitations of Gini indicator, SWIID database (version 4.1)I The role of taxes and transfers: why taxes matter?
Figure: Redistribution of income and in-equality of outcome
Northern America
Eastern AfricaMiddle Africa
Northern Africa
Southern Africa
Western Africa
Caribbean
Central America
South AmericaCentral Asia
Eastern Asia
Southern Asia
South-Eastern Asia
Western AsiaEastern Europe
Northern Europe
Southern Europe
Western Europe
Australia and New Zealand
Melanesia
2025
3035
4045
Tota
l rev
enue
(as
a sh
are
of G
DP)
0 5 10 15Decline in post-tax Gini index
Northern America
Eastern AfricaMiddle Africa
Northern Africa
Southern Africa
Western Africa
Caribbean
Central America
South AmericaCentral Asia
Eastern Asia
Southern Asia
South-Eastern Asia
Western Asia
Eastern Europe
Northern Europe
Southern Europe
Western Europe
Australia and New Zealand
Melanesia
2530
3540
4550
Tota
l exp
endi
ture
s (a
s a
shar
e of
GD
P)
0 5 10 15Decline in post-tax Gini index
I Larger public sectors reduce inequality more significantlyI Progressivity/regressivity of revenue mobilization/expenditure matters:
Southern Africa vs. Southern Europe (VAT and capital expenditure)
Figure: Redistribution of income-generating assets and in-equality ofopportunity (i) human capital
Northern AmericaEastern Africa
Middle Africa
Northern Africa
Southern Africa
Western Africa
CaribbeanCentral America
South America
Central Asia
Eastern Asia
Southern AsiaSouth-Eastern Asia
Western Asia
Eastern EuropeNorthern EuropeSouthern Europe
Western Europe
Australia and New Zealand
Melanesia
3040
5060
Gin
i ind
ex
2 4 6 8 10 12Public expenditure on health
Northern AmericaEastern Africa
Middle Africa
Northern Africa
Southern Africa
Western AfricaCaribbean
Central America
South America
Central Asia
Eastern Asia
Southern AsiaSouth-Eastern Asia
Western Asia
Eastern Europe
Northern EuropeSouthern Europe
Western Europe
Australia and New Zealand
Melanesia
3040
5060
50 60 70 80Life expectancy
I MDG: social spending fosters human development and economic growthI More unequal subregions tend to allocate fewer resources to human
development, resulting in lower life expectancy/education
Figure: Redistribution of income-generating assets and in-equality ofopportunity (ii) wealth
2040
6080
100
23
45
67
1900 1980 2000 20101914-18 1929 1939-45
EU capital stock/GDP (LHS) US capital stock/GDP (LHS)EU top 10 per cent wealth share (RHS) US top 10 per cent wealth share (RHS)EU top 10 per cent income share (RHS) US top 10 per cent income share (RHS)
I Piketty data: capital stock accumulation and the mutually reinforcingdynamic between wealth and income inequality
I Controversy about r>g...
Figure: Redistributive policies and the un-sustainable use andun-equitable access to natural resources for present and futuregenerations
ItalyUnited Kingdom
Korea
Germany
France
Australia
Spain
Japan
Canada
United States
TurkeyBrazil
South AfricaChina
ArgentinaMexico
India
05
1015
20CO
2 em
issio
ns p
er c
apita
(m
etric
tons
)
-1 0 1 2 3 4Environmental tax revenue (as a share of GDP)
Note: High income=blue; upper middle income=maroon; lower middle income=green.
I Higher environmental tax revenue is associated with lower carbonemissions per capita, but environmental taxes remain underexploited
I Regressive? What about progressive consumption taxes related toquantities consumed (e.g. frequent flyer tax instead of rewards)?
REDISTRIBUTIVE POLICY TRENDS IN A CHANGINGCONTEXT
Stylized facts:I Since 2000, public social spending (as a share of GDP)
increased in most developing regions, but less than indeveloped regions, except for LAC
I Social protection (pensions, unemployment insurance, etc.) asa share of GDP is 3 to 6 times higher in developed countries
I Total government revenue amounted to 42 % of GDP indeveloped countries in 2010, around 35 % of GDP intransition economies and in the Middle East and NorthAfrican countries, and between 20% to 28 % of GDP in otherdeveloping regions
I Shifting towards regressive tax structuresI Declining environmental tax revenueI Dwindling net wealth taxesI Tax abuses: tax avoidance and tax evasion on the riseI Privatization of public income-generating assets
TOWARDS PROGRESSIVE ASSET-CENTEREDREDISTRIBUTIVE POLICIES FOR SUSTAINABLEDEVELOPMENT
I DefinitionsI Policies and institutionsI International cooperation
Redefining equity and development in sustainable terms
I Focusing on asset inequality, not income povertyI Enabling trade-offs between economic growth, social equity and
environmental sustainabilityI Redefining the metrics of equity and development
Building institutions and designing policies enablingasset-centred redistributive policies for equity andsustainable development
I Modernizing tax administration for increased and progressive taxrevenue mobilization
I More progressive tax systems for reducing inequality of outcomeI Shifting the tax base towards wealth for enhancing equality of
opportunityI Shifting the tax base towards environmental externalities for
incentivizing sustainable production and consumption, and shortervalue chains
I Socializing natural resource rents and/or ownership to ensuresustainable use and equitable access for present and futuregenerations
I Redistributing income-generating assets for economic democracyand sustainable development
I Investing in people: a rights-based approach to human development
Fostering international cooperation
I Bridging the gap with ODA for public social spending and revenuemobilization
I Promoting financial transparency to prevent tax abuses by HNWIsand TNCs
I Addressing harmful tax competition through unitary taxation tocombat tax avoidance
I Taxing mobile capital (unilaterally) to eradicate extreme wealth andreduce international inequality
Asset-Centred Redistributive Policies forSustainable Development
Pierre KohlerUnited Nations - DESA/DPAD/DSP, New York
September 25, 2014