-series—essential for the analysis undertaken here. Our overall finding is that some structural reforms do tend to give rise to growth-equity tradeoffs. However, the fact that reforms increase inequality should not be viewed as a reason to abandon structural reforms or undo reforms that have been undertaken. The net effect of reforms on growth remains positive for most reforms indicators, even after considering the negative effect from increased inequality. We also find that the extent of the trade-off between growth and equity varies by reform type. A granular approach to the
reforms, how can politicians navigate the issue, and even manage to get re-elected given the risk of vocal opposition from the losers? Recognizing that structural reforms may generate growth-equity tradeoffs, Jonathan Ostry’s new paper analyzes the impacts of reforms on both growth and inequality. He finds that a lot depends on what type of reform is being considered. Domestic financial deregulation, external capital market liberalization, and some measures of current account reform increase both growth and inequality. But basic institutional reforms that, for
Front Matter Page Research Department Contents I. INTRODUCTION II. A REVIEW OF THE LITERATURE III. REFORMS DATA IV. GROWTH-EQUITY TRADE-OFFS: AN ASSESSMENT FRAMEWORK V. GROWTH-EQUITY TRADE-OFFS IN REFORMS: RESULTS A. Domestic Finance Reforms B. Capital Account Liberalization C. Rule of Law D. Current Account Liberalization E. Networks Reform F. Collective Bargaining Reforms G. Reforms, Growth, and Inequality: A Look at Country Cases VI. STRUCTURAL REFORMS, INEQUALITY, AND GROWTH: A SIMPLE CALCULATION VII. CONCLUSION