The chartbook of economic inequality

Tony Atkinson, Salvatore Morelli

Inequality – long ignored – is now centre stage in debate about economic policy around the globe. This column introduces the Chartbook of Economic Inequality, a summary of long-run changes in economic inequality for 25 countries over more than 100 years.

Inequality – long ignored – is now centre stage in debate about economic policy around the globe. The 2007-2008 collapse of the global financial system and the subsequent economic downturn/debt crises have acted as a catalyst for growing anxiety around the increasing dispersion of incomes within most advanced economies. We are not “all in it together”. The acute loss of job prospects, especially among the young, the credit crunch and the austerity measures implemented by governments to contain the sovereign debt crisis have all put extra burden on the shoulders of the lower and middle classes. Public discourse has started to openly debate the economic implications as well as the legitimacy of increasingly powerful elites seizing a growing share of the national pie year after year. These concerns, led the Managing Director of the IMF, Christine Lagarde to indicate the need for “addressing inequality and building inclusive growth” as one of three ‘milestones’ of the future global economy, in her October 2012 Annual Meetings Speech in Tokyo.

In order to make sense of these concerns, and to advise on policy, we need hard evidence about the extent of economic inequality, about how it is changing, and about how it compares across nations. Interestingly, researchers and scholars have also began to single out inequality as one of the structural causes of the recent financial crisis. This has led us to compile the Chartbook of Economic Inequality. The purpose of this Chartbook is to present a summary of evidence about long-run changes in economic inequality for 25 countries covering more than one hundred years. There is a range of countries and they account for more than a third of the world’s population: Argentina, Brazil, Australia, Canada, Finland, France, Germany, Iceland, India, Indonesia, Italy, Japan, Malaysia, Mauritius, Netherlands, New Zealand, Norway, Portugal, Singapore, South Africa, Spain, Sweden, Switzerland, the UK and the US. The results are presented in 25 charts, one for each country, together with a description of the sources. The Chartbook brings together the findings of many statistical agencies and researchers. In particular, it draws on the work of the authors of the country studies in the top incomes project published in Atkinson and Piketty (2007 and 2010) and now made available in the World Top Income Database (Alvaredo, Atkinson, Piketty and Saez).

What do we mean by inequality?

Inequality of what and among whom? Different people care about different dimensions of inequality, but these dimensions are often confused. We begin with the distribution of income, i.e. the total that people receive in earnings, investment income and government (and other) transfers, after allowing for the income tax paid. But we also wish to consider the separate roles of labour income and capital income, and have therefore shown the long term changes in the distributions of earnings and wealth. We are concerned with the overall distribution, commonly measured by the Gini coefficient of inequality, but we also follow what happens to poverty and to riches. The Chartbook shows the share of the top 1%, and the proportion of the population living below the poverty line.

Our emphasis is on change over time. We have therefore concentrated on comparability over time, and for this reason presented the evidence country by country. The underlying figures are available for download on the Chartbook webpage.

The main aim of the Chartbook is to allow readers to draw their own conclusions, but we have included below each chart a table summarising our answers to the following questions:

Has the dispersion of earnings been increasing in recent decades?

Has overall income inequality increased in recent years?

Have there been periods when overall inequality fell in a sustained way?

Has poverty been rising or falling over the past decades?

The US and certain other countries have seen top income shares first fall and then rise, is there a U-shaped pattern of this kind?

Has the concentration of wealth moved in the same way as income inequality?

These are only some of the questions that readers will want to ask, but they capture some of the issues in current debate about the evolution of economic inequality.

Example for the UK

Example for the US

Authors’ note: An earlier version of this column appeared on the INET blog.

References

Alvaredo F, A B Atkinson, T Piketty and E Saez, World Top Incomes Data-Base (WTID)

Atkinson, A B and S Morelli (2010), Inequality and Banking Crisis: a First Look, Report for the International Labor Organization.

Atkinson, A B and S Morelli (2011), "Economic Crisis and Inequality", Human Development Research Paper, 2011/06, UNDP, New York.

Atkinson, A B (2008), The changing distribution of earnings in OECD countries, Oxford University Press, Oxford.

Atkinson, A B and TPiketty (eds.) (2007), Top incomes over the twentieth century, Oxford University Press, Oxford.

Atkinson, A B and T Piketty (eds.) (2010), Top incomes: a global perspective, Oxford University Press, Oxford.

Brandolini, A (2002), “A bird’s eye view of long-run changes in income inequality”, Bank of Italy Research Department, Rome.