Lead Economist, World Bank’s Research Department,

When we think of income inequality, our first reaction is to think of it within the borders of a country. This is quite understandable for a world where the nation-state is very important in determining one’s income level, access to a number of benefits, from pensions to free health care, and where by far the dominant way in which political life is organized is at the level of a country. However, in the era of globalization another way to look at inequality between individuals is to go beyond the confines of a nation-state, and to look at inequality between all individuals in the world. Once we do so, many of the things about inequalities in general that we believe or that we think we know change; it is like going from a two-dimensional flat world to a three-dimensional one. As the world becomes more integrated the global dimension of inequality is likely to become increasingly relevant. This for at least two reasons: because of much greater movement of factors of production across borders, and because of greater influence of other people’s (foreigners’) standard of living and way of life on one’s perceived income position and aspirations. Greater movement of capital, goods, technology and ideas from one end of the globe to another implies greater connectivity with people who are not one’s compatriots, and greater dependence on other nations for generation of one’s income. Movements of labor which illustrate this interdependenc