AS per the OECD's recent studies, the gap between poor and rich has been widening in some of the already high-inequality countries, such as Israel and the United States. But countries such as Denmark, Germany and Sweden, which have traditionally had low inequality, are no longer spared from the rising inequality trend: in fact, inequality grew more in these three countries than anywhere else during the past decade. However, some countries recorded declining income inequality recently, often from high levels like Chile, Mexico and Turkey. In OECD countries,the average income of the richest 10% of the population is about nine times that of the poorest 10%.

Among the causes, the study notes that while tax-benefit policies in the past, have offset some of the large increases in market-income inequality, they appear to have become less effective at doing so over the past 10-15 years. Up until the mid-1990s, tax-benefit systems in many OECD countries offset more than half of the rise in market-income inequality. However, since then, while market-income inequality continued to rise, the stabilising effect of taxes and benefits on household income inequality has mostly declined. In some countries, taxes and benefits became less redistributive during the past decade.

Looking at policies to tackle inequality, it says that reforming tax and benefit policies is the most direct and powerful instrument to increase redistributive effects. Large and persistent losses of low-income groups following recessions underline the importance of well-targeted income-support policies. Government transfers – both in cash and in-kind – have an important role to play to guarantee that low-income households do not fall further back in the income distribution.