Rising Inequality in Asia and Policy Implications

16 Pages Posted: 22 Feb 2014

See all articles by Juzhong Zhuang

Juzhong Zhuang

Asian Development Bank

Ravi Kanbur

Cornell University; Centre for Economic Policy Research (CEPR); IZA Institute of Labor Economics

Changyong Rhee

Asian Development Bank

Date Written: February 21, 2014

Abstract

This paper looks at the recent trends of rising inequality in developing Asia, asks why inequality matters, examines the driving forces of rising inequality, and proposes policy options for tackling high and rising inequality. Technological change, globalization, and market-oriented reform have driven Asia’s rapid growth, but have also had significant distributional consequences. These factors have favored owners of capital over labor, skilled over unskilled workers, and urban and coastal areas over rural and inland regions. Furthermore, unequal access to opportunity, caused by institutional weaknesses and social exclusion, has compounded the impacts of these forces. All these combined have led to a falling share of labor income in national income, increasing premiums on human capital, and growing spatial disparity — all contributing to rising inequality. The three drivers of rising inequality cannot and should not be blocked, because they are the same forces that drive productivity and income growth. This paper outlines a number of policy options for Asian policy makers to consider in addressing rising inequality. These options, aiming to equalize opportunities and, thereby, reduce inequality, include efficient fiscal measures that reduce inequality in human capital, policies that work toward increasing the number and quality of jobs, interventions that narrow spatial disparity, and reforms that strengthen governance, level the playing field, and eliminate social exclusion.

Keywords: growth, globalization, inequality, governance

JEL Classification: D63, O15, O53

Suggested Citation

Zhuang, Juzhong and Kanbur, Ravi and Rhee, Changyong, Rising Inequality in Asia and Policy Implications (February 21, 2014). ADBI Working Paper 463. Available at SSRN: https://ssrn.com/abstract=2399298 or http://dx.doi.org/10.2139/ssrn.2399298

Juzhong Zhuang (Contact Author)

Asian Development Bank ( email )

6 ADB Avenue, Mandaluyong City 1550
Metro Manila
Philippines

Ravi Kanbur

Cornell University ( email )

301-J Warren Hall
Ithaca, NY 14853
United States
607-255-7966 (Phone)
607-255-9984 (Fax)

HOME PAGE: http://www.kanbur.dyson.cornell.edu

Centre for Economic Policy Research (CEPR)

London
United Kingdom

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Changyong Rhee

Asian Development Bank ( email )

6 ADB Avenue, Mandaluyong City 1550
Metro Manila
Philippines

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