Rethinking the Fight Against Inequality

Inequality 2050: A global forecast

This World Inequality Lab working paper by Philipp Bothe, Lucas Chancel, Amory Gethin, and Cornelia Mohren projects global income inequality to 2050 using World Inequality Database data from 143 countries, for the period 1980-2023, combined with growth and population projections. The authors construct four scenarios based on how income growth is distributed within countries:​

1. Business-as-usual (BAU): Each income percentile continues capturing the same share of national income growth as observed during 2000-2023
2. Pre-tax redistribution: Countries converge toward the growth trend of the three most equal countries in their region (e.g., policies affecting wages, education, capital income)
3. Post-tax redistribution: Countries converge toward the most progressive tax-and-transfer systems in their region
4. Combined: Both pre-tax and post-tax convergence occur simultaneously

Climate scenarios incorporate country-level damage estimates, with damages distributed regressively across income groups.

Findings
Business-as-usual scenario
Under current trends, global inequality will remain stubbornly high:​

• The global bottom 50% post-tax income share rises only marginally from 10% to 12% by 2050
• The top 1% share remains constant at approximately 17%
• An average top 1% individual will still earn about 70 times more than someone in the bottom 50% (down from 85x today)

Policy Scenarios
The paper tests different redistribution approaches:​

• Pre-tax redistribution i.e. changing how market income is distributed proves most effective and could raise the bottom 50% share to nearly 17%
• Post-tax redistribution, through taxes and transfers, alone has limited impact, raising the bottom 50% income share to only 15%
• Combined scenario: If countries adopt both the most progressive pre-tax and post-tax profiles in their regions, the bottom 50% share could nearly double to  around 20% by 2050

Climate change impact
Climate change could severely undermine convergence gains:​

• In a high-impact scenario, the bottom 50% share could fall back to 6.5%, levels last seen in the 1980s
• The poorest 50% bear 74% of relative climate losses, while the richest 1% bear only 3%
• Climate damages could fully offset all income convergence gains since 1980

Global Income Inequality by 2050: Convergence, Redistribution, and Climate Change
Authors: Philipp Bothe, Lucas Chancel, Amory Gethin, Cornelia Mohren
From: Paris School of Economics, Sciences Po, The World Bank

Inequality as interconnected forces

This paper by Steven N. Durlauf, David McMillon, and Scott Page explores how complexity theory can enhance our understanding of economic inequality and inform more effective policies.

Methodology

The authors take a theoretical and conceptual approach rather than an empirical one. They organize existing inequality models into four categories and analyze each through the lens of complexity science:

1. Individualistic models: Explain income as a function of personal attributes (ability, effort, parental investment)
2. Social interaction models: Incorporate peer effects, neighborhood effects, and network structures that create social multipliers amplifying initial inequalities
3. Institutional/structural models: Examine how laws, policies, and political institutions (e.g., Jim Crow, redlining) embed and reinforce inequalities from the top down
4. Intergenerational models: Track lineages over time to explain persistent inequality across generations

A key distinction is made between bottom-up systemic causes, arising from individual interactions, and top-down structural causes, embedded in institutions.

Findings

• Complexity and neoclassical economics are complements, not rivals as both offer useful but incomplete insights.
• Compounded disadvantages are interdependent, not additive: Poor health affects school performance, which affects employment, which affects health—these reinforce each other in feedback loops.
• Isolated interventions often fail because reinforcing loops within systems pull outcomes back to the status quo. Fifty years of crime-reduction randomized control trials show few replicable effects.
• Traditional experiments may underestimate treatment effects by ignoring spillovers, for example, cash transfers and early childhood education show significant indirect effects on untreated individuals.

Policy implications

The authors propose three complexity-informed policy strategies:

• Disrupt amplification mechanisms e.g., use wealth taxes to break poverty traps.
• Exploit systemic effects to amplify equality-focused interventions e.g., enhanced capital market access for minorities.
• Coordinate policies across systems: Improving local economies without also investing in health and education may fail because system failures in one area prevent progress in others.

Complexity Theory and Economic Inequality
Authors: Steven N. Durlauf, David McMillon, Scott Page
From: University of Chicago, Emory University, University of Michigan