Friday, May 30, 2014

Andrés Velasco — Monsieur Piketty Goes to Latin America

A recent paper by economists at the International Monetary Fund, using a new data set covering many countries, is fairly sanguine about the potential for increased redistribution without undermining economic growth. But the paper also offers a reminder that there are limits to how much income the tax system can redistribute....
The problem is that Chile’s after-tax Gini coefficient is approximately 50 (Brazil, Colombia, and Peru have similar figures), while those of the advanced countries are mostly in the low 30’s or even the high 20’s. Turning Chile and some of its neighbors into countries with OECD levels of equality will require a great deal more than tax reform.
Put differently: if a society’s initial playing field is very uneven, that society will remain quite unequal even after a sizeable fiscal redistribution. The policy focus, therefore, must also be on what Yale University political scientist Jacob Hacker calls “pre-distribution”: changing the market-determined structure of wage incomes.
Project Syndicate
Monsieur Piketty Goes to Latin America
Andrés Velasco, a former presidential candidate and finance minister of Chile, is Professor of Professional Practice in International Development at Columbia University's School of International and Public Affairs

1 comment:

Dan Kervick said...

I think "pre-distribution" is really not much different than what what Piketty calls "democratic control of capitalism". His policy prescriptions include more than the wealth tax.

Also, Piketty argues that high marginal rates have a pre-distributive effect, and that removing them in the English speaking countries is what is chiefly responsible for the soaring of executive super-salaries post-1980.