Fair and inclusive markets: Why dynamism matters

Abstract

AbstractWe argue that the economies that achieved inclusive growth, or high sustained and broad‐based growth while keeping a lid on the increase in market income inequality, are characterised by dynamism—a drive towards the acquisition of new capabilities in sophisticated products and processes. What a country produces and how much it competes domestically and internationally are important for achieving fair and inclusive markets. We show empirical evidence that dynamism, as measured by export sophistication, reduces market income inequality and poverty while increasing a broad concept of welfare. We explore policy options to steer industrial and market structures towards raising dynamism, thus providing growth opportunities for both workers and firms.