N°01/17 JANUARY 2017 | GOVERNANCE Reducing inequalities within countries: converting the global debate into action

Lucas Chancel (Paris School of & IDDRI), Alex Hough (IDDRI), Tancrède Voituriez (IDDRI & CIRAD)

DOMESTIC INEQUALITIES AS A KEY CHALLENGE A growing body of literature highlights the negative impacts of rising domestic inequalities on a wide number of political, social, economic and environmental issues—thus rendering domestic inequalities a key sustainable development challenge. However, over the past decade, despite growing concern, debates have not been converted into action, and domestic inequalities keep rising. The inclusion of inequalities within the Sustainable Development Goals framework shows that the interna- tional community is now willing to tackle the problem. POLICY-DRIVEN (REDUCTION OF) INEQUALITIES The rise in inequalities is policy-driven: all the major drivers identified in the literature point to a certain extent to a policy failure. This is the case for the erosion of labour institutions, the decline in fiscal progressivity, skill-biased technical change, trade and financial liberalization, and the increasing political power of the wealthy. If policies, rather than exog- enous forces drive rising inequality, then implementing more inclusive policies can reverse the trend. SDGs CAN CONTRIBUTE TO THE REDUCTION OF INEQUALITIES The SDGs provide three levers to turn the global inequality debate into national action: peer focus (a common metric), peer pressure (a ranking of countries) and peer review (mutual learning of policies). Matching the drivers of inequalities with these levers for action, our main finding is that even though the current contribution is quite limited, the potential of SDGs for domestic inequalities reduction deserves attention. While the common metric exists, only significant involvement from civil society and commitment from governments will make it possible for peer pressure and learning to become effective. TACKLING INEQUALITIES WITHIN LONG-TERM DEVELOPMENT STRATEGIES Institut du développement durable The global inequality debate within the SDG framework will not by itself et des relations internationales trigger national action. The relationship between SDGs and international 27, rue Saint-Guillaume trade, investment and fiscal agreements in particular needs to be clarified www.iddri.org 75337 Paris cedex 07 and made consistent with long-term sustainable development strategies. Copyright © 2017 IDDRI As a foundation of public utility, IDDRI encour- ages reproduction and communication of its copy- righted materials to the public, with proper credit (bibliographical reference and/or corresponding URL), for personal, corporate or public policy research, or educational purposes. However, IDDRI’s copyrighted materials are not for commer- cial use or dissemination (print or electronic). Unless expressly stated otherwise, the findings, interpretations, and conclusions expressed in the materials are those of the various authors and are not necessarily those of IDDRI’s board.

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Citation: Chancel, L., Voituriez, T., Hough, A. (2017). Reducing inequalities within countries: converting the global debate into action, Study n°01/2017, IDDRI, Paris, France, 26 p.

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This article has received financial support from the French government in the framework of the programme “Investissements d’avenir”, managed by ANR (the French National Research Agency) under the reference ANR-10-LABX-01. Reducing inequalities within countries: converting the global debate into action Lucas Chancel (PSE and IDDRI), Alex Hough (IDDRI), Tancrède Voituriez (IDDRI-CIRAD)

1. INTRODUCTION 5 2. WHY INEQUALITY REDUCTION IS NOW PART OF THE GLOBAL POLICY AGENDA? 6 2.1. Inequality has become a universal issue 7 2.2. The cost of inaction progressively unveiled 9 3. T