Inequality

Abstract

This paper reviews five striking facts about inequality across countries. As Kuznets (1955) famouslyfirst documented, inequality first rises and then falls with income. More unequal societies are muchless likely to have democracies or governments that respect property rights. Unequal societies haveless redistribution, and we have little idea whether this relationship is caused by redistributionreducing inequality or inequality reducing redistribution. Inequality and ethnic heterogeneity arehighly correlated, either because of differences in educational heritages across ethnicities or becauseethnic heterogeneity reduces redistribution. Finally, there is much more inequality and lessredistribution in the U.S. than in most other developed nations.