No One Actually Knows About Income Inequality

h/t to Paul Kedrosy for posting about an interesting income inequality article:

Dan Ariely et al. conducted a recent research study on people’s perceptions of US income inequality. They had three major findings:

  • Respondents dramatically underestimated the current level of wealth inequality.
  • Respondents constructed ideal wealth distributions that were far more equitable than even their erroneously low estimates of the actual distribution.
  • All demographic groups—even those not usually associated with wealth redistribution such as Republicans and the wealthy—desired a more equal distribution of wealth than the status quo.

Just recently in a Global Health course, we were shown the breakdown of global income inequality. It’s also pretty ridiculous. In fact, 40% of world’s wealth is owned by 1% of the population. In fact, the richest fifth of the population receives 82.7% of the total world income.

 

One can also see that the disparity is widening:

Data taken from (Dikhanov 2005)

In a recent Financial Times comment, Kermal Dervis (Director of the Global Economy and Development program at the Brookings Institution) argued that this global income inequality is not only immoral, it threatens future global economic growth:

Less inequality in income distribution may not only be ethically desirable – it may be a necessary condition to resolve global macroeconomic fragility and ensure more sustained growth. It is time to analyse income distribution also with a macroeconomic policy perspective.

 

 

References:

Dikhanov, Yuri. 2005. Trends in Global Income Distribution, 1970-2000, and Scenarios for 2015. Human Development Report Office (HDRO), United Nations Development Programme (UNDP). http://econpapers.repec.org/RePEc:hdr:hdocpa:hdocpa-2005-08.

 

 

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