Social Policy Frameworks for Reducing Inequality and Promoting Inclusive Development

Income inequality remains a major obstacle to inclusive development. In addition, the effectiveness of social policies depends not only on the amount of public expenditure, but also on access and the administrative effectiveness of benefit delivery. This paper examines the impact of the various types of social policy framework design on income inequality for 48 economies between 2005 and 2024. These economies are divided into universal, hybrid, and targeted social policy frameworks with the average Gini coefficient of 28.0, 37.6, and 47.8, respectively. During the observation period, their Gini coefficient decreased by 1.9, 1.7, and 1.5 points, respectively. An increase in social protection spending by one percentage point of GDP leads to a 0.44-point reduction in the Gini coefficient, while an increase in the take-up rate of benefits by one percentage point leads to a 0.07-point decline in the Gini coefficient. A decrease in the index of administrative burden by ten points leads to 0.36 points reduction of the Gini coefficient. Approximately 0.9 points of inequality was added in the years 2009 and 2020 due to crisis, and these impacts were offset during the next year. Inequality is estimated to fall by approximately 1.6 points due to an increase in the budget for social protection expenditure and better benefit receipt through improved administration and benefit take-up. In general, the results show that the success of inclusive development does not depend only on the level of social protection expenditure, but also on how efficiently such expenditures can be delivered. Since a harmonised simulated data set has been used for the analysis, the results are presented only as scenario estimates.