What Should We Do About Inequality?

Ricardo Hausmann:

Inequality is the result of many different phenomena. Some of them should be a source of policy concern while others should not. My main problem is the inequality that arises from differences in productivity—namely, differences in productivity across regions, across cities, within cities and across social groups. We know that there are huge differences in income across countries of the world: the richest countries are 200 to 300 times richer than the poorest countries in per capita terms. That’s inequality at the global scale.

That is mostly caused by differences in productivity. It’s not because there’s a global pie and it is shared unequally between the rich countries and the poor countries. These are just independent pies of radically different size. At the global level, the bulk of inequality across countries is inequality in productivity.