Reducing income inequality: Through labour market pressure and wages or through redistribution?

There are two ways to reduce income inequality, and OECD countries have made different choices. The first option is to stimulate demand at a time when the unemployment rate is already low, leading to rapid wage growth that helps reduce income inequality before redistribution. This was done, for example, in the United States from 2016 to 2019, and in Germany from 2013 to 2019. The disadvantage of this strategy is that it requires maintaining stimulatory economic policies even in the second half of growth periods. The second option is to allow high income inequality before redistribution and to correct it with large-scale redistributive policies. This is the choice made by France. The disadvantage of this strategy is the high tax burden needed to finance redistributive policies.