A Policy Matrix For Inclusive Prosperity

Rodrik/Stantcheva, “…The framework can be summarized by a 3 x 3 matrix, shown in Figure 1. 3 We consider that the discussion of policies can be organized around two questions or dimensions. First, which income group is the target of the policies intended to counter inequality or economic insecurity? Is it mainly the low-income households at the very bottom of the income distribution? Or is it rather the middle classes, who have traditionally had access to good jobs, but are increasingly facing reduced standards of living and growing economic insecurity in many nations? Is it instead the high-income or high wealth households at the very top that keep concentrating more economic power - as well as political power, possibly -- individually and through stocks in large corporations? Policy priorities will naturally differ depending on whether the target is the poor at the bottom, the middle classes, or the top of the income distribution. This dimension of policy is captured by the rows of the matrix in Figure 1. The second question relates to the stage of the economy where the intervention takes place.A useful and increasingly frequently used distinction, based on Hacker (2011), is between “pre-distribution” and “redistribution” policies. In this terminology, “redistribution” policies are ex post policies, that transfer income and wealth once they have been realized (e.g., redistributive transfers, progressive taxation, and social insurance). They reshape inequalities after the economic decisions regarding employment, investments, or innovations have been made. We will use the term postproduction policies instead to denote these policies….”