1Inequality and Economic and Political Change

This paper was prepared for the United Nations Research Institute on Social Development. It describes the broad evolution of inequality in the world economy over the past four decades, and summarizes the relationship between inequality, economic development, political regimes and the functional distribution of income. The evidence on inequality comes from a series of data sets built by the University of Texas Inequality Project, freshly updated through 2003, showing a decline in global inequality after 2000. Data on the related factors is developed in background papers by Hyunsub Kum, Sara Hsu and Olivier Giovannoni, to be published shortly in the UTIP working paper series. As a matter of definition, economic inequality is associated with poverty: other things equal, distributions with fat tails have more people at the lower end. But, are other things equal? Are highly unequal countries generally richer than egalitarian countries, or are they generally poorer? Does inequality tend to rise or fall with rising income, or is there some complicate