We published a new topic page on economic inequality

Over the past twenty years, public attention to economic inequality has significantly increased. This growing interest has been matched by improvements in available data, which now covers more countries and longer time periods. Previously, data on inequality was limited to individual nations, but today, researchers can analyze it from a global perspective. This shift is possible thanks to new international databases that make data more comparable and accessible. For example, the World Bank’s Poverty and Inequality Platform (PIP), the Luxembourg Income Study, and the World Inequality Database now provide comprehensive datasets. Despite these advances, the variety of sources and measurement methods can be overwhelming, as different approaches to measuring inequality have their own strengths and weaknesses. This complexity makes it challenging to understand how these methods relate to each other or where to begin analyzing the data.

Data from international databases reveals that inequality levels differ greatly across countries. For instance, the 90th/10th percentile ratio (a measure of inequality) shows that in the United States, the richest 10% earn 7 times more than the poorest 10%, while in Germany, the gap is 4.5 times. In Brazil, the ratio is even higher at 10 times. These differences highlight that inequality is not solely determined by factors like economic development or technology adoption. Instead, a country’s institutions and policies play a crucial role in shaping inequality levels. For example, Angola’s inequality is twice as high as Madagascar’s or Vietnam’s, despite similar levels of development. This variation suggests that high inequality is not inevitable and can be influenced by policy choices.

Inequality exists not only within countries but also between them. The World Bank’s Poverty and Inequality Platform provides data on both types of inequality. For example, while the richest 10% in the United States earn more than those in Germany, the poorest 10% in Germany are slightly better off than their counterparts in the U.S. However, in low-income countries like Angola and Madagascar, incomes are extremely low across the entire population. Even the richest 10% in these countries earn far less than the poorest 10% in high-income nations. The global median income is $290 per month, meaning half the world’s population lives on less than $10 a day. This stark contrast helps explain why people in rich countries often underestimate global inequality.

Since 1990, incomes have risen across the global distribution, though the increases have been unequal. The income threshold to enter the richest 10% rose from $37 to $55 per person per day, while the threshold for the poorest 10% increased by only $1.80. In percentage terms, the largest gains were at the bottom half of the distribution, with the incomes of the poorest 10% and the global median more than doubling. This growth lifted hundreds of millions of people out of extreme poverty, defined as living on less than $3 a day. However, the richest 10% saw smaller proportional increases, growing by about half. These trends illustrate how global income inequality has evolved over time.

Three major databases provide insights into economic inequality. The World Bank’s Poverty and Inequality Platform (PIP) offers global coverage, using income data for high-income countries and consumption data for low- and middle-income countries. The Luxembourg Income Study provides harmonized cross-country data, making comparisons easier. The World Inequality Database tracks the incomes of the richest individuals and groups. Together, these databases help researchers and policymakers understand inequality patterns. For example, the PIP data shows that inequality within countries varies widely, while the World Inequality Database highlights the concentration of wealth among the top earners. These tools are essential for analyzing inequality trends and informing policy decisions.