Bailout

How income inequality is changing

By Felix Salmon

Bill Easterly thinks that inequality is fractal:

Income inequality behaves like a fractal: income is very uneven at large scales and at small scales…

We are going to go from global to the US to the New York City metro area to the neighborhood of NYU in Manhattan. At each scale, there is a remarkably high level of inequality across space.

The rich coastal cities in the US and the poor rural South. Rich lower and midtown Manhattan and poor South Bronx. Rich West Village and Soho and poor Lower East Side.

This is true, as far as it goes, but I think it misses the fact that the degrees of inequality at various different scales are changing in important ways. Over the past few decades, the gap between China and the US, to take one obvious example, has narrowed sharply — even as the degree of inequality within both China and the US has increased markedly.

The trend, then, I think, is for inequality to increasingly ignore national borders. You can get rich clusters across borders, as in say the area between Porto Alegre, Montevideo, and Buenos Aires, or any number of megaregions in Europe. At the same time, the gaps between the richest and the poorest areas of most countries are only growing larger.

Easterly’s map of the world, where every country is a uniform color, conceals more than it reveals. Once upon a time, national borders were useful boundaries to use when measuring per-capita income across the planet. And given that statistical agencies are still national, that’s not going to change any time soon. But those numbers are going to be less and less informative as pockets of wealth spring up in poor countries, and pockets of poverty persist in middle-income nations.

Full post as published by Macroprudential on September 10, 2010 (boomark / email).