Economic Inequality: A Global Perspective on Income and Wealth Distribution Trends

Economic Inequality: A Global Perspective on Income and Wealth Distribution Trends

What is the distribution of income and wealth among individuals, both within nations and globally?

This page serves as a comprehensive resource for all our data, graphics, and articles focusing on economic disparity.

The gathered evidence highlights that inequality is significantly high in numerous countries and has, in many instances, escalated over time. Global economic disparity is profound and is exacerbated by related inequalities in areas like health, education, and several other aspects.

However, economic inequality is not universally on the rise. In many nations, it has either decreased or remained constant. Moreover, after two centuries of growth, global inequality is now on a downward trajectory.

The substantial disparities we observe across nations and time periods are pivotal. They reveal that high and escalating inequality is not an inexorable fate. Indeed, the level of inequality we witness today is something we possess the potential to alter.

This data explorer tool, by our World in Data, offers a variety of inequality indicators, calculated based on two distinct income definitions derived from separate sources. 

The World Inequality Database supplies data relevant to inequality prior to the application of taxes and benefits. In contrast, the World Bank provides data corresponding to either income after taxes and benefits, or consumption, varying by country and year.

More detailed information about the methodologies and definitions used for this data is available in the accompanying article. The article also allows for a more extensive exploration and comparison of indicators from a wide range of sources.

This report suggests that the trajectory of income inequality within countries over the past century has not been uniform, but has generally followed either a U-shaped or L-shaped pattern. 

In many nations, income inequality experienced dramatic declines throughout the early and mid-20th century. For example, the share of income received by the wealthiest 1% often dropped by half or more from pre-World War I levels to the 1970s. This can be described as the descending portion of the "U" or "L."

Starting in the 1980s, some countries, such as the US, UK, Canada, and Italy, witnessed an upswing in inequality, completing the U-shaped trajectory. In these countries, the share of income held by the top 1% has risen substantially in recent decades, with the US's income inequality levels returning to those seen a century prior.

Conversely, many nations have maintained relatively stable levels of inequality since the mid-20th century decline, tracing the L-shaped pattern. These countries include Japan, Sweden, Spain, France, and the Netherlands. 

The variations in inequality trends across different countries demonstrate that rising inequality is not an inevitability but can be influenced by individual nations' policies, politics, and institutions. This suggests that global economic forces like technological progress, globalization, or capitalism do not completely determine inequality, but national contexts also play a significant role.

The data used in these assessments primarily come from income tax records, which provide a long-term view of income distribution and are more likely to accurately capture the incomes of the wealthiest. Household surveys, by contrast, can underestimate top incomes due to factors such as 'top-coding' (capping incomes at a certain threshold to protect respondents' anonymity), lower participation rates among richer households, and underreporting of income. As a result, household surveys can often miss the 'extremely' rich, leading to an understatement of income inequality. Despite these challenges, statistical agencies employ various strategies to improve their estimates and capture top incomes more accurately.

Source:

Joe Hasell (2023) - "How has income inequality within countries evolved over the past century?". Published online at OurWorldInData.org. Retrieved from: 'https://ourworldindata.org/how-has-income-inequality-within-countries-evolved-over-the-past-century' [Our World In Data]