Economic inequality is the disparity in wealth (the value of assets such as homes and investments) and income (the money people earn from activities like work or investment) between individuals. It can fuel democratic backsliding, encourage migration, hinder economic growth, and exacerbate health crises, among other problems.
The causes of heightened inequality are complex. Technological change and globalization have transformed economies in ways that have shifted the distribution of resources and power. But the magnitude of those shifts has been uneven from country to country. Moreover, the growth of inequality has been driven by a range of domestic factors that are unique to each economy.
For example, educational achievement is important for determining individual opportunities. But the availability of social capital—the networks that open doors to opportunity—is also crucial. In addition, people’s access to health care and financial services can shape their outcomes.
Government policies can be powerful tools to mitigate the effects of these trends and to reduce inequality. This guide, drawing on research from a Peterson Institute conference on “Combating Inequality” and subsequent work by attending experts, includes an overview of current trends in inequality within countries, a survey of existing policies to combat the rise of inequality, and a list of potential future policy options. This guide is one part of PIIE’s larger project on Economic Inequality.
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