ABSTRACT
Advanced economies have a much longer history of using fi scal policy to promote inclusive growth than those in developing Asia. Addressing inequality has traditionally been one of the key strategic objectives of fi scal policy in the advanced economies which tend to use progressive taxation to redistribute resources from the rich to the poor via transfers and subsidies. Organisation for Economic Co-operation and Development (OECD) governments have actively and explicitly sought to redistribute income to achieve a more equitable income distribution. In contrast, Asian governments used fi scal policy to lay the foundation for macroeconomic stability and hence economic growth by avoiding government budget defi cits. Another contribution of fi scal policy to growth in Asia has been large investments in growth-conducive infrastructure and education that have contributed to the stock of physical and human capital.
