The Trend in Between-Nation Income Inequality

Abstract

About seventy percent of the world's total income inequality is between-nation inequality as opposed to within-nation inequality. Between-nation inequality is the bigger component because average incomes in the richest nations are roughly 30 times greater than average incomes in the poorest nations. This highly uneven distribution of income across nations likely reflects the long-run divergence of national incomes over the course of the Industrial Revolution. Empirical investigations suggest, however, that between-nation income inequality has stabilized in recent decades. Because between-nation inequality has stabilized, the direction of the current trend in total world income inequality depends on the direction of the change in income inequality in the average nation.