Where in the World are You? Assessing the Importance of Circumstance and Effort in a World of Different Mean Country Incomes and (Almost) No Migration

Abstract

Suppose that all people in the world are allocated only two characteristics: country where they live and social class within that country. Assume further that there is no migration. We show that 90 percent of variability in people's global income position (percentile in world income distribution) is explained by only these two pieces of information. Mean country income (circumstance) explains 60 percent, and social class (both circumstance and effort) 30 percent of global income position. But as at least 1/3 of the latter number is due to circumstance as well, the overall part of circumstance is unlikely to be under 70 percent. On average, "drawing" one-notch higher social class (on a twenty-class scale) is equivalent to living in a twelve-percent richer country. Once people are allocated their social class, it becomes important, not only whether the country they are allocated to is rich or poor, but whether it is egalitarian or not. This is particularly important for the people who "draw" low or high social classes; for the middle classes, income distribution is much less important than mean country income.

Keywords: Global inequality, income distribution, migration

JEL Classification: D31, I3, 057