Let’s narrow the focus to incomes and assume that people care only about their own consumption levels . “Rich” and “poor” are those in the top and bottom 5% of the income distribution, respectively. In a typical rich country, the poorest 5% of the population receive around 1% of national income. Data is a lot sparser for poor countries, but it would not be too much off the mark to assume that the richest 5% there receive 25% of national income.
Now, we can calculate that a rich person in a poor country has an income of $5,000 while a poor person in a rich country earns $13,000 . Measured by material living standards, a poor person in a rich country is more than twice as well off as a rich person in a poor country. The larger point of this comparison is to underscore the importance of income differences across countries, relative to inequalities within countries. At the dawn of modern economic growth, before the Industrial Revolution, global inequality derived almost exclusively from inequality within countries. Income gaps between Europe and poorer parts of the world were small.
Second, inequalities began to increase in many advanced economies, especially those with less-regulated labour markets and weak social protections. The rise in inequality in the United States has been so sharp that it is no longer clear that the standard of living of the American “poor” is higher than that of the “rich” in the poorest countries .
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