Unit 10 Women’s right to vote and the reduction in child mortality in the United States
10.14 Policy matters and economics works: Government success
Well-designed government policies can improve living standards for the vast majority of citizens. The economic policies of the Chinese government since the 1980s have resulted in the most rapid eradication of large-scale poverty ever witnessed in human history. Another example is the clean water and sanitation policies that were behind the global reduction in child mortality.
In other cases, there are substantial differences between economies across the world in the extent to which problems of market failure and unfairness are effectively addressed. The limits imposed by special interests, as well as economic feasibility and administrative capacity, differ across countries; some governments are unable to overcome them, but others succeed.
Climate change policies
Sweden and Switzerland have roughly the same per capita income as Australia, Canada, and the US. If they all faced similar constraints of economic, policy, and political feasibility in adopting policies to limit greenhouse gas impacts on climate, then we would expect their similarity in income to be matched by similarity in CO2 emissions.
The relationship between income and carbon emissions is discussed in detail in Section 9.12. Use Figure 9.28 to explore the data for these and other countries.
But this is not at all what Figure 10.21 shows. Canada, Australia, and the US emit about four times as much CO2 per capita as Sweden and Switzerland.
Figure 10.21 The association between GDP per capita and CO2 emissions, 2022.
It seems likely that what is economically feasible may not differ very much in these three countries, as all share the same knowledge about technologies, and their citizens are likely to respond in similar ways to incentives to adopt cleaner energy sources. The government information and capacities in these five countries are also similar: all have well-informed and capable governments.
Although carbon dioxide emissions are affected by industrial structure, trade specialization, and energy sources such as hydro-electricity, they are also affected by what is desired by the elites, who have political influence. Policies to address climate change are more likely to have political support in the two European countries. One reason for this difference is the importance in US, Canadian, and Australian politics of lobbies representing the fossil fuel industries, including the gas, oil, and coal producers.
Income inequality
Governments use redistributive taxation and transfer policies to reduce inequalities in disposable income (as described in Section 10.4). The extent of redistribution is a political choice: some groups gain and others lose. It is also economically controversial, since it may be argued that in practice taxation reduces the incentives to work and invest, resulting in a trade-off between efficiency—the size of the pie (aggregate income), and fairness—sharing it more equally.
But as Figure 10.22 illustrates, if we compare the inequality of disposable income across high-income countries with established democracies, there is no evidence of such a trade-off: many of the countries with lower inequality in disposable income also have high productivity.
Figure 10.22 Income inequality and output per head in high-income countries, 2022.
Note: Correlation coefficient: −0.33.
World Inequality Database, 2025; World Bank Group. 2025. World Development Indicators; International Labor Organization, 2025.
Countries with similar levels of aggregate income per capita have very different distributions of disposable income: the Gini coefficient ranges from 0.22 in Denmark to 0.32 in Germany and 0.46 in the US. It is clear that some countries can design redistribution policies that are both economically and politically feasible.
What can we learn from these comparisons?
One lesson, if we wish to address problems like climate change and unfair inequalities in living standards, is that for most countries it is possible to do a lot more than is currently being done. The fundamental forces contributing to inequality in the high-income countries—new technologies and growing imports (from China, for example) that make the skills of low-paid workers redundant—do not differ much among the high-income countries in Figure 10.22. The differences appear to be a matter of choices among the similar set of policies that are economically and administratively feasible, some countries opting for policies that sustain high levels of inequality, and others pursuing the goal of greater equality.
We also have a lot to learn from the top performers in these and similar figures, by studying the policies and institutions that appear to account for their success in addressing market failures and unfairness.
Early education
Economic research has explored the question of how schooling and preschool experience affect inequality. Some of this research has led to the policy recommendations that are being followed by governments aiming to improve the life chances of their citizens.
James Heckman, a leader in this field, talks about his research in our Economist in Action video below. You may also want to read his book Giving Kids a Fair Chance.1
His book begins by noting that, ‘The accident of birth is a principal source of inequality in America today. American society is dividing into skilled and unskilled … birth is becoming fate.’
Heckman’s ‘strategy that works’ is based on the following logic. ‘Both cognitive and socio-emotional skills develop in early childhood and their development depends on family environment.’ Growing up poor deprives children of opportunities to develop these skills, and ‘family environments in the US have deteriorated’.
One of the CORE authors provides an appreciative and also critical summary of Heckman’s strategy.
In response, Heckman advocates ‘early interventions’ such as enriched preschool environments and home visits by professionals to assist parents, which his research shows can ‘produce positive and lasting effects on children in disadvantaged families.’
Policies of the kind advocated by Heckman are being implemented in countries including Colombia, Jamaica, Chile, and in the state of Orissa in India. Teams of economists and experts in child development are rigorously evaluating them for their longer-term effects and to assess the feasibility of scaling them up from small pilot interventions.
We know that the children of poor parents often grow up to be poor. We now also know that this has little to do with genetics, and more to do with the socio-emotional behaviour associated with growing up poor. We now know of, and governments can implement, effective policy remedies to break this cycle of poverty.
Note for EBW: The following tinyco.re link needs to be updated to point to the web book, rather than YouTube, once the URLs for this unit have been confirmed.
James Heckman explores the question of how schooling and preschool experience affects inequality.
Question 10.11 Choose the correct answer(s)
According to the Economist in Action video of James Heckman, which of the following individual attributes are NOT listed by Heckman as one of the reasons for persistent poverty in a family from generation to generation?
- Inherited IQ could contribute to persistent poverty, but it is not mentioned in the video.
- Heckman argues that this is among the reasons for persistent poverty.
- Heckman argues that this is among the reasons for persistent poverty.
- Heckman argues that this is among the reasons for persistent poverty.
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James Heckman. 2013. ‘Giving Kids a Fair Chance: A Strategy That Works’. Cambridge, MA: MIT Press. ↩
