Addressing the challenge of inequalities in middle income countries: tailoring tools and priorities to the circumstances and inequality dynamics of these countries

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After a historical decline in most parts of the world from the 1920s to the 1970s, income inequality is on the rise in nearly all countries. Gini-coefficient-based rankings of inequality show that some of the most unequal places are middle-income countries, home to five billion people and 73% of the world’s poor.

However, different countries have experienced widely different inequality trajectories, highlighting the importance of political and institutional factors in shaping income dynamics. Latin American countries, starting from extremely high levels, have made significant progress in terms of inequality reduction in the first decade of the 2000s and have positive experiences and lessons learnt to share. Asian countries, historically more egalitarian, have seen inequality surge by over 5 percentage points in the last 20 years, despite the economic growth registered by the region during the period. Successful poverty and inequality responses need to look at the sources of inequality and adapt policies accordingly.  

In terms of global lessons learnt from recent research, income tax progressivity is considered a key tool to combat rising income and wealth inequality at the top. But tax systems are highly regressive in large emerging countries. More equal access to quality education and good paying jobs is also considered key to countering the stagnation and sluggish income growth rates of the bottom half of the population. There can be enormous gaps between the beliefs evinced in public discourses about equal opportunity and the realities of unequal access to education.