The Political Economy of Inequality in Developing Countries: More Politics Than Economics

Abstract

Inequality is on the top of policy agenda around the globe. Despite of the recent growing public interest around this very issue, much of the public debate is characterized by a deep misunderstanding regarding the nature, sources and idiosyncrasies of persistence inequality in developing countries. Considered primarily as an economic phenomenon primarily, policy responses use to focus on redistribution of income, assets or wealth led by the State. However, the vast majority of national governments in developing world are unable to correct market income imbalance, failing to put in place progressive taxation schemes and cash transfers in favor of the poor due to a mix of political capture by ruling elites, weak state capacity to enforce law and collect taxes and chronic fiscal debts restrain. The present article takes a different political economy-based approach of the phenomena, considering it as (mainly) a political phenomenon - that, as such, demands a political solution. The article discusses seven counter-intuitive ideas about inequality in developing countries and offers recommendations toward a more broad and effective policy agenda.