Global Income Inequality

This graph depicts the distribution of global income among equally sized fifths of the world population, showing the extreme concentration of income within the richest 1/5 of the world. Source: Conley, D. (2008) You may ask yourself: An introduction to thinking like a sociologist. New York: W.W. Norton and Company. p.392.

As Prof. Nelson mentioned in lecture, the subject of income inequality, at both the domestic and international levels, has received a lot of attention lately — and rightly so! There have been many attempts to depict just how extreme the disparity in income and wealth is, but I think Branko Milanovic, an economist at the World Bank, has probably done the most exhaustive work on this subject and especially on how global income inequality has changed over time. Here is a link to a (fairly technical) presentation summarizing his research. Some striking findings from that presentation and from his book, The Haves and the Have-Nots: A Brief and Idiosyncratic History of Global Inequality:

  • 60 percent of a person’s income is determined solely by where she was born (and an additional 20 percent is dictated by how rich her parents were)
  • 9 percent of world population receives one half of global income. The bottom 50% of the world population receives about 7% of global income.
  • The average person in the top 5 percent of the Indian income distribution makes the same as or less than the average person in the bottom 5 percent of the American income distribution
  • This disparity creates an enormous desire and demand for migration. Citing a World Bank survey Milanovic writes that, “countries that have done economically poorly would, if free migration were allowed, remain perhaps without half or more of their populations.”

Prof. Nelson also mentioned French economist Thomas Piketty’s book Capital in the Twenty-First Century, which draws extensively upon cross-national historical data to make the case that returns to capital increase much more quickly than the economy grows (the famous r>g) and that this is a structural source of income inequality inherent in global capitalism. Piketty’s book is quite long and dense, but there are some excellent reviews of it available if you want to learn more. I recommend, in particular, Paul Krugman’s review in the New York Review of Books.

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