Reducing inequality: Germany’s approach to integrating a distributional perspective in international co-operation

Abstract

The German Development Cooperation’s Global Project on Reducing Inequality provided partner countries with tailored cross-sectoral expertise, capacity development and peer-to-peer exchange to put inequality reduction at the heart of policy making. The project aims to strengthen options for policies and strategies to reduce inequalities by exploring collaborative models with partner countries. It is grounded in distributional approaches to drive broader systemic changes and promote sustainable development. The project was implemented in ten partner countries, including Colombia, Ghana, India, Indonesia, Kenya, Mexico, Namibia, South Africa, Viet Nam and Zambia

This content is part of TIPs In Practice series on poverty and inequalities developed in collaboration with the Development Co-operation Report 2024: Tackling poverty and inequalities through the green transition. 

Challenge

Income inequality in 2024 mirrors the levels seen at the beginning of the 20th century: the richest 10% of the world’s population earns 52% of global income while the poorest half earns only 8.5%, according to the Global Sustainable Development Report 2023. This disparity poses significant challenges to economic growth, as it benefits only a few rather than the broader population, leading to negative outcomes for social cohesion and well-being and hindering sustainable development.

To address this challenge and in line with Germany’s commitment for “Less Inequality”, the German Federal Ministry for Economic Cooperation and Development (BMZ) commissioned the German Development Agency (GIZ) to implement the Global Project on Reducing Inequality. The project provided clear guidance for policy making, exploring collaborative models with partner countries grounded in systemic and distributional approaches for reducing inequality and promoting sustainable development.

Approach

The Global Project on Reducing Inequality was implemented in ten partner countries (Colombia, Ghana, India, Indonesia, Kenya, Mexico, Namibia, South Africa, Viet Nam and Zambia), based on the following:

• An analytical tool. The project used Inequality Diagnostics to understand inequalities, evaluate political strategies and develop potential policy solutions tailored to national circumstances. Findings are shared with relevant stakeholders in partner countries. At the moment the Inequality Diagnostics are available for ten countries.

• A multisectoral approach with a distributional perspective. Recognition of the multisectoral nature of inequality led to the implementation of a comprehensive strategy from the outset. This strategy focused on the distribution of resources, opportunities and benefits across groups and the population at large.

• Project design and services tailored to the partner country’s needs. The project embraced openness and flexibility, allowing stakeholder collaboration and engagement rather than rigid prescriptions, empowering partners to select solutions aligned with their evolving needs.

Results

Results achieved during the project implementation phase (February 2020 to January 2024) included:

• Integration of the multidimensional nature of inequality into national development plans. In Kenya, collaboration with the National Gender and Equality Commission (NGEC) commenced with an Inequality Diagnostic that lead to broadening of NGEC's understanding of inequality to encompass income, wealth and disparities of opportunities beyond gender. Preparation of a National Inequality Action Plan is set to begin in late 2024. In Namibia, collaboration with the SDG Initiative Project and the National Planning Commission identified inequality as a barrier to the implementation of the 2030 Agenda, resulting in recommendations that integrated inequality into the national development plan.

• Capacity development and technical assistance. A professional online training course on inequalities was conducted 5 times between 2020 and 2023, engaging 125 policy makers from diverse sectors and governmental institutions across approximately 30 African, Asian and Latin American countries. Evaluations and follow-up activities, including peer-to-peer exchanges, interactive learning sessions, and three alumni courses, demonstrated the course’s efficacy in enabling participants to integrate dimensions of inequality into their sectoral analysis and work. Technical expertise was also instrumental in incorporating a distributional perspective into South Africa’s Just Transition Partnership and advisory support to Colombia’s newly established Ministry of Equality and Equity.

• Multi-stakeholder collaboration. Partnering with government institutions, civil society organisations and academia facilitated dialogue, research and action. Active participation in the OECD Community of Practice for Poverty and Inequalities strengthened connections among experts and increased attention to the agenda at the DAC and internationally. Support for Oxfam’s work on the redistributive impact of fiscal policy (SDG indicator 10.4.2) improved the framework for tracking progress in reducing inequality in Ghana and Indonesia. Collaboration with Wits University in South Africa brought a Southern perspective to the forefront and understanding of inequalities in the region.

• These and further selected processes will be continued and further developed by other German Development Cooperation projects.

Lessons learnt

• Incorporating a distributional perspective can facilitate the design and implementation of policies and projects that address the underlying causes of inequality rather than merely the symptoms. Policy makers and practitioners are encouraged to adopt a distributional approach to achieve development goals. The Inequality Diagnostic offers an understanding of inequality and identify the most urgent needs for reducing it.

• Focusing on both macro and micro enablers in strategies and policy frameworks allows projects to transcend sector-specific approaches and address the cross-sectoral nature of inequality. International co-operation is vital, providing relevant cross-cutting expertise. Adopting a distributional perspective can further help shift the focus from micro to macro levels.

• Proxy indicators and a mid-to-long-term perspective are essential to support national inequality reduction strategies. It is challenging to measure a project’s impact on systemic changes such as reducing inequality. Commonly agreed-upon proxy indicators, such as distributional impact of tax collection and government spending for each sector as reported by fiscal incidence analysis, facilitate the integration of an inequality perspective into projects. This integration also requires long-term engagement and collaboration with partners. The experience in Kenya highlighted that effective implementation depends on the political will of stakeholders.

• Enhancing learning through the integration of multi-stakeholder collaboration and capacity building into one project enables a faster feedback loop compared to separate projects.

Further information

UNRISD (2022), Flagship Report 2022: Crises of Inequality, https://cdn.unrisd.org/assets/library/reports/2022/full-report-crises-of-inequality-2022.pdf

World Inequality Lab (2022), World Inequality Report 2022, https://wir2022.wid.world/www-site/uploads/2023/03/D_FINAL_WIL_RIM_RAPPORT_2303.pdf

UNDESA (2020), World Social Report: Inequality in a Rapidly Changing World, https://www.un.org/development/desa/dspd/wp-content/uploads/sites/22/2020/02/World-Social-Report2020-FullReport.pdf

BMZ, Position Paper: Less Inequality, https://www.bmz.de/resource/blob/157174/positionspapier-weniger-ungleichheit-en.pdf

UNESCO, World Social Science Report, 2016: Challenging Inequalities; Pathways to a Just World, https://unesdoc.unesco.org/ark:/48223/pf0000245825

One-pager on Inequality Diagnostics and brief on Inequality Indicators (in German)

OECD resources

OECD (2024), Development Co-operation Report 2024: Tackling poverty and inequalities through the green transition., OECD Publishing, (forthcoming).

OECD (2001), Poverty Reduction, The DAC Guidelines, OECD Publishing, Paris, https://doi.org/10.1787/9789264194779-en.

To learn more about Germany’s development co-operation see:

OECD, “Germany”, in Development Co-operation Profiles, OECD Publishing, Paris, https://doi.org/10.1787/2dcf1367-en. 

See more In Practice examples from Germany here: https://www.oecd.org/development-cooperation-learning?tagkey+partner=germany#search.