The evolution of world income inequality: assessing the impact of globalization

Abstract In the last two centuries (1800-2000) the world has seen an unprecedented increase in the capacity to create material wealth and undergo technical change. At the same time, this is also a period of large disparities in income per head, living standards across (and within) countries and regions of the world. Large inequalities can eventually undermine global integration and social stability thus hampering long run growth prospects and the legitimacy of globalization. Global inequalities reflect both inequalities across nations, driven mainly by divergences in economic performance (e.g. growth rates) across countries that cumulate over time and by national inequality that depend on factor prices, patterns of resource ownership and other factors. Policies to reduce global inequalities have to focus in raising growth rates of poorer countries, improve income distribution at national level and facilitate some global redistribution to low-income nations.