Global Inequality and Economic Growth : The Three Decades before Covid-19 and Three Decades After

Global income inequality captures income differences among all individuals around the world. Global inequality around the world increased from 1820 to 1990 as incomes in richer countries grew faster than incomes in relatively poorer countries. However, these trends were reversed over the three decades starting in 1990. Inequality among all citizens of the world decreased as populous and relatively poorer countries, in particular China, reduced the income gap with richer parts of the world. Growth in average incomes played a critical role in this reduction, with differences within countries contributing relatively little. The Covid-19 pandemic abruptly halted the reduction in global income inequality and was responsible for the largest increase in global income inequality in at least three decades. The future of global inequality largely depends on how incomes grow in various parts of the world. If the trends of the last three decades continue, inequality may increase as growth in those countries that drove the reduction in inequality now contributes to increasing inequality, since these countries are in the upper part of the global distribution. However, if poorer countries today grow faster than their richer peers, global inequality could continue to fall. Climate adaptation and mitigation challenges will play an increasing role in shaping country-level growth trends and thus the changes in global income inequality.