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© 2021 International Monetary Fund


IMF Working Paper

Institute for Capacity Development

The Political Economy of Inclusive Growth: A Review

Prepared by Barbara Dutzler, Simon Johnson, and Priscilla Muthoora 1

Authorized for distribution by Valerie Cerra

March 2021

IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.


In this paper, we review the role of the political economy in inclusive growth. We find that political economy forces on the demand and supply side have weakened redistribution over time and contributed to a new wave of populism. We document growing support for a rethink of the social contract to make growth more inclusive and discuss some of its broad elements.

JEL Classification Numbers: D72, D31, O11

Keywords: Political Economy, Inequality, Redistribution, Growth

Authors’ E-Mail Addresses:;;


  • Abstract

  • I. Introduction

  • II. Demand for Redistribution: Theory and Practice

    • A. Political participation and preferences for redistribution

    • B. What other factors shape preferences?

  • III. The ‘Supply’ of Redistribution

    • A. Setting the stage for redistribution: Welfare States

    • B. Measuring pro-poorness of redistribution

  • IV. Which Political Regimes Deliver More Redistribution?

    • A. Redistribution under Proportional and Majoritarian Representation

    • B. Redistribution with Changing Political Cleavages

    • C. Redistribution under Populism: Then and Now

    • D. Redistribution under Populism: The Outcome

    • E. A Tipping Point?

  • V. The ‘How’ and ‘When’ of Redistribution

    • A. ‘Pre-distribution’ versus ‘Redistribution’

    • B. What are the constraints?

    • C. Lessons from International Experience

    • D. The COVID-19 Pandemic: A Game Changer?

    • E. Policy Options

  • VI. Concluding Remarks

  • References

  • Figures

  • Figure 1. The Income Skew of Voter Turnout in Advanced Economies

  • Figure 2. Determinants of Support for or Opposition to Redistribution

  • Figure 3. Public Social spending in the OECD (Percent of GDP)

  • Figure 4. Change in Income Inequality and Social Protection: 2000-2018

  • Figure 5. Social Protection and Labor Programs (SPL)

  • Figure 6. Vote Shares in European Countries

  • Figure 7. Evolution of Democracies and Autocracies since 1800


Barbara Dutzler: Joint Vienna Institute; Simon Johnson: MIT Sloan School of Management; Priscilla Muthoora: International Monetary Fund. We thank Valerie Cerra, Moya Chin, Hamid Davoodi, Barry Eichengreen, participants in the Inclusive Growth book seminar series organized by the IMF Institute for Capacity Development, and colleagues from the IMF for useful comments and suggestions. We also thank Christina Fong, Vincent Mahler, and Piotr Paradowski for permission to reproduce their data. This is a draft of a chapter that has been accepted by Oxford University Press for publication in the forthcoming book “How to Achieve Inclusive Growth?”, edited by V. Cerra, B. Eichengreen, A. El-Ganainy, and M. Schindler, due for publication in 2021.

The Political Economy of Inclusive Growth: A Review
Author: Mr. Simon Johnson and Ms. Priscilla S Muthoora