5 Research Articles on Inequality
Research on the causes and affects of inequality has risen in recent years, with many seeing it as a threat to global governance and cooperation to tackle pressing challenges. Below, Global Policy presents five research articles exploring the topic:
Global Income Inequality in Numbers: in History and Now
Branko Milanovic
This article presents an overview of calculations of global inequality, recently and over the long term, and outlines the main controversies and political and philosophical implications of the findings. It focuses in particular on the winners and losers of the most recent episode of globalization, from 1988 to 2008. It suggests that the period has witnessed the first decline in inequality between world citizens since the Industrial Revolution. However, the decline can be sustained only if countries’ mean incomes continue to converge (as they have been doing during the past ten years) and if internal (within-country) inequalities, which are already high, are kept in check. Mean-income convergence would also reduce the huge ‘citizenship premium’ that is enjoyed today by the citizens of rich countries.
Reducing Inequalities within Countries: Assessing the Potential of the Sustainable Development Goals
Lucas Chancel, Alex Hough and Tancrède Voituriez
Income and wealth inequality are rising in most countries around the world today. Recognising that this challenge has become a universal issue, the United Nations agreed in 2015 to seventeen Sustainable Development Goals (SDGs), as part of a global agenda to transform society. Specifically, SDG Target 10 commits countries to ‘reduce inequalities within and among countries’. To what extent SDGs and in particular SDG target 10 can help nations reverse inequality towards a downward trend is the question we address in this paper. To answer this question, we build on the theory of change underpinning the goal-based governance characterising the SDGs, then we infer the added value of the SDGs along three criteria: the production of a common metric, the capacity to emulate peer pressure, and policy learning within and across countries. Across these three criteria, our main finding is that there is much that states can take away from the SDGs to address the problem of rising inequality, though success is conditional on achieving the buy-in of key actors and epistemic communities for which domestic inequalities remains a domestic issue and not a global sustainability one.
Income Inequality, Financial Systems, and Global Imbalances: A Theoretical Consideration
Li Sheng
This paper illustrates the effects of two major macroeconomic factors on global imbalances with regard to China as a growing giant in the global economy. The country has observed a continuous drop in the labor income share of GDP and a considerable rise in income inequality, giving rise to a savings glut and high investment rates. China's inflation, housing bubble, and capital losses in foreign markets are attributable to its rushed transition to market-based financing and its inherent vulnerability to international capital flows. The US is also experiencing a rise in inequality, although this rise is associated with a decline in savings as a fundamental cause of its current account deficit, whereas its exorbitant privilege from the dollar's reserve currency status is accompanied by increasing difficulties posed by the Triffin dilemma. It is shown that global imbalances may be less related to misaligned exchange rates than to distorted wage differences.
Global Inequality: From Class to Location, from Proletarians to Migrants
Branko Milanovic
Inequality between world citizens in the mid-19th century was such that at least a half of it could be explained by income differences between workers and capital owners in individual countries. Real income of workers in most countries was similar and low. This was the basis on which Marxism built its universal appeal. More than 150 years later, in the early 21st century, the situation has changed fundamentally: more than 80 per cent of global income differences is due to large gaps in mean incomes between countries, and unskilled workers′ wages in rich and poor countries often differ by a factor of 10 to 1. This is the basis on which a new global political issue of migration has emerged because income differences between countries make individual gains from migration large. The key coming issue will be how to deal with this new challenge while acknowledging that migration is probably the most powerful tool for reducing global poverty and inequality.
Inequality and the Tails: the Palma Proposition and Ratio
Alex Cobham, Lukas Schlögl and Andy Sumner
The Palma Proposition is that changes in income or consumption inequality are (almost) exclusively due to changes in the share of the richest 10 per cent and poorest 40 per cent because the ‘middle’ group between the richest and poorest tend to capture approximately 50 per cent of gross national income (GNI). The Palma Ratio is a measure of income or consumption concentration based on the above-mentioned proposition and calculated as the GNI capture of the richest 10 per cent divided by that of the poorest 40 per cent. In this paper we revisit the empirical basis of the Palma Proposition (the relative stability of the ‘middle’) with a new and expanded data set across and within developing and developed countries. We find the data reaffirms the Palma Proposition and that the proposition is getting stronger over time.
Image credit: Guillaume Paumier via Flickr (CC BY 2.0)
