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This paper presents a new approach to measuring the intergenerational transmission of well-being and a novel perspective on which measures and what age ranges to use to estimate intergenerational social mobility. We select the measures and the age ranges that best predict important human capital outcomes of children. The predictive power of parental resources varies among measures of parental resources as well as the age ranges used to measure them. Lifetime measures outperform traditional snapshot proxies for lifetime incomes based on income flows at certain age windows in predicting child outcomes, regardless of the ages when child outcomes are measured. The sensitivity of IGE estimates to the ages at which parental resources are measured is far smaller than their sensitivity to whether lifetime measures are used or whether snapshot measures are used. We also find that the financial resources of parents compensate in part for non-monetary inputs to child human capital such as the stability of the family and education of parents. We interpret our estimates using the technology of skill formation modified to account for the emergence of new skills in adolescence.

Using micro-data from the Household, Income and Labour Dynamics in Australia (HILDA) Survey, and the Oaxaca-Blinder decomposition technique, this paper contributes to knowledge on gender-gaps in financial literacy (FL) via a study of teenagers, emerging adults and young adults. The analysis suggests that important predictors of FL include schooling, high school-type, labour market activity and parental employment. There are large unexplained gaps, equal to 31.6%, 19.3% and 11.9% amongst those aged 15-19, 20-24 and 25-29, respectively. Very little of the gap may be explained by gender differences in human capital variables and other characteristics, including mathematics ability, cognitive ability and personality. The main conclusion is that the gap starts young and likely derives from gender stereotype beliefs.

Earlier research on poverty failed to provide us with consistent measures of its prevalence across space and time. This is due to the limitations of the available sources and to the difficulty of applying to them the poverty definitions of modern social science. This article discusses different possible approaches to poverty measurement and the problems encountered when applying them to historical sources. Thereafter it proposes a way to measure absolute and, more importantly, relative poverty which makes good use of the information made available by recent research on inequality. We detect a long-run tendency towards an increase in the prevalence of poverty, both in the South and in the North of Europe. This trend was only temporarily interrupted by large-scale plague and other catastrophes, although the Black Death had stronger and more persistent poverty-reducing effects. Our approach, which this article applies mostly to Italy, the Low Countries and partially Germany and other areas, could be used for even broader international comparisons.

This paper studies intergenerational mobility—the transmission of family influence. We develop and estimate measures of lifetime resources (income and wealth) motivated by economic theory that account for generational differences in life-cycle trajectories, uncertainty, and credit constraints. These measures of lifetime resources allow us to estimate the transmission of welfare and lifetime resources at different stages of the life cycle. We compare these measures with traditional ones such as wage income and disposable income measured over narrow windows of age that are used to proxy lifetime wealth. The performance of proxy measures is poor. Parents' expected lifetime resources are stronger predictors of many important child outcomes (including children's own expected lifetime resources and education) than the income measures traditionally used in the literature on social mobility. Changes in patterns of educational attainment across generations explain most of the intergenerational change in life-cycle dynamics. While relative mobility is overstated by the traditional income measures, absolute upward mobility is understated. Recent generations have higher welfare and are better off compared to their parents.

The path of urbanization around the world and in particular in China has been rapid. This study addresses measurement of a composite index of networking among key components of societal infrastructure and how it affects the process of urbanization. This study has a number of objectives. First we identify key determinants of public infrastructure components in China at the province level. Second a multidimensional index of the networking among the components is computed. The index belongs to parametric family of composite indices. It is composed of a number of components: Economic, Hospitality, Public Facilities, Human Development, and Communication Facility. Each component of the index is composed of a number of indicators. The index is used to rank provinces in China by development of level of the networking among public infrastructure components. In another step we estimate the effects of the composite index and its underlying components on urbanization. Finally, the findings is used to achieve smooth urbanization strategy for Chinese provinces. The empirical results are based on China's province level data covering the period 2005-2014. Our investigations provide evidence that integration of technological and social components are necessary to promote the development of an optimal and a smart urban development model. The necessity of an optimal and targeted urban infrastructure investment strategy emerges from our analysis. We briefly discuss the possible lessons learned from some of the successful provincial urbanization strategies.

Recent research has explored the distributive consequences of major historical epidemics, and the current crisis triggered by Covid-19 prompts us to look at the past for insights about how pandemics can affect inequalities in income, wealth, and health. The fourteenth-century Black Death, which is usually believed to have led to a significant reduction in economic inequality, has attracted the greatest attention. However, the picture becomes much more complex if other epidemics are considered. This article covers the worst epidemics of preindustrial times, from Justinian’s Plague of 540-41 to the last great European plagues of the seventeenth century, as well as the cholera waves of the nineteenth. It shows how the distributive outcomes of lethal epidemics do not only depend upon mortality rates, but are mediated by a range of factors, chief among them the institutional framework in place at the onset of each crisis. It then explores how past epidemics affected poverty, arguing that highly lethal epidemics could reduce its prevalence through two deeply different mechanisms: redistribution towards the poor, or extermination of the poor. It concludes by recalling the historical connection between the progressive weakening and spacing in time of lethal epidemics and improvements in life expectancy, and by discussing how epidemics affected inequality in health and living standards. (Stone Center on Socio-Economic Inequality Working Paper Series)

Amidst considerable debate on the relationship between entrepreneurship and economic inequality, scholarship only indirectly addresses how entrepreneurship informs individuals' relative well-being. We theorize on the nuanced relationship between entrepreneurship and equality of eudaimonic well-being through the lens of New Institutional Economics. Drawing on theories of human flourishing, we suggest that entrepreneurial action is an underappreciated mechanism by which individuals pursue well-being. Equality of well-being is thus influenced by a society's entrepreneurial accessibility: the freedom of individuals to choose to engage in entrepreneurial action. We present a multilevel framework in which institutional factors enable entrepreneurial action by promoting entrepreneurial accessibility-a factor, that, in turn, affects well-being for individual entrepreneurs as well as societal eudaimonic equality. The ex ante conditions for equality of well-being entail institutions that yield broad entrepreneurial accessibility. Our work highlights the institutional prerequisites for human flourishing in the entrepreneurial society beyond (unequal) economic distributions.

After an economically tough start into the new millennium, Germany experienced an unprecedented employment boom after 2005 only stopped by the COVID-19 pandemic. Persistently high levels of inequality despite a booming labour market and drastically falling unemployment rates constituted a puzzle, suggesting either that the German job miracle mainly benefitted individuals in the mid- or high-income range or that other developments offset the effects of the drastically improved labour market conditions. The present paper solves this puzzle by breaking down the observed changes in the distribution of disposable incomes between 2005/06 and 2015/16 into the contributions of eight different factors, one of them being the employment boom. Our results suggest that, while the latter did have an equalising impact, it was partially offset by the disequalising impact of other factors and substantially dampened by the tax and transfer system. Our results point to a strong role of the German tax and transfer system as a distributional stabilizer implying that, if the COVID-19 shock were to persistently reverse all the employment gains that occurred during the boom, this would only have a moderately disequalising effect on the distribution of net incomes.

Individuals often hold erroneous beliefs about their socio-economic status relative to others. We develop a new machine learning technique to measure these misperceptions and use large-scale international survey data to compute status misperception for 241,757 households from 97 countries (24 OECD, 73 non-OECD). We show that status misperception is a widespread phenomenon across the globe. Upward-biased perceptions are associated with lower preferences for redistribution and have direct consequences for welfare provision via the tax and transfer system. The effect accounts for approximately 9% of the variation in redistribution preferences, is independent of socio-demographic characteristics, robust to measurement errors in social surveys, and occurs similary when we change the underlying micro data or examine party preferences.

This paper analyses the extent to which the Italian welfare system provides monetary compensation for those who lost their earnings due to the lockdown imposed by the government in order to contain the COVID-19 pandemic in March 2020. In assessing first-order effects of the businesses temporarily shut down and the government's policy measures on household income, counterfactual scenarios are simulated with EUROMOD, the EU-wide microsimulation model, integrated with information on the workers who the lockdown is more likely to affect. This paper provides timely evidence on the differing degrees of relative and absolute resilience of the household incomes of the individuals affected by the lockdown. These arise from the variations in the protection offered by the tax-benefit system, coupled with personal and household circumstances of the individuals at risk of income loss.

Neighbourhood socioeconomic disadvantage has a profound impact on individuals’ earnings and life satisfaction. Since definitions of the neighbourhood and research designs vary greatly across studies, it is difficult to ascertain which neighbourhoods and outcomes matter the most. By conducting parallel analyses of the impact of neighbourhood deprivation on life satisfaction and earnings at multiple scales, we provide a direct empirical test of which scale matters the most and whether the effects vary between outcomes. Our identification strategy combines rich longitudinal information on individual characteristics, family background and initial job conditions for England and Wales with econometric estimators that address residential sorting bias, and we compare results for individuals living in choice-restricted social housing with results for those living in self-selected privately rented housing. We find that the effect of neighbourhood deprivation on life satisfaction and wages is negative for both outcomes and largely explained by strong residential sorting on both individual and neighbourhood characteristics rather than a genuine causal effect. We also find that the results overall do not vary by neighbourhood scale.

The public health measures implemented by governments to limit the spread of the COVID-19 pandemic will produce significant economic consequences that are likely to exacerbate social and economic inequalities. In this paper we provide a framework to analyse how income inequality, besides other structural and policy-related features, shapes the trade-off between economic lockdown and contagion. We then supply empirical evidence, by means of simulation analysis, on the distributive effects of the lockdown for 31 European countries. Our results confirm that the lockdown is likely to significantly increase inequality and poverty and that the magnitude of the change is larger in more unequal countries. Such a cumulative process shapes a serious challenge for social and economic stability in the most vulnerable countries, which needs adequate policy response. However, the magnitude of the compensating measures is likely to be financially unsustainable, forcing them to lift necessary public health measures prematurely in order to avoid social collapse. This is likely to increase the risk of a new spread of the pandemic that might easily spill over to other countries. A supranational, coordinated health and fiscal policy effort is therefore in the interest of all economies willing to be part of a globalised economy.

This paper studies the pro-poor bias of contemporary trade policy in India by estimating the household welfare effects of eliminating the current protection structure. The elimination of a pro-poor trade policy is expected to have lower welfare gains or higher welfare loss at the low end of the per capita expenditure distribution. The paper first constructs trade restrictiveness indices for household consumption items and industry affiliations using both tariffs and the ad-valorem equivalent of non-tariff barriers. The welfare effects are estimated through its impacts on household expenditure and earnings. The results indicate that Indian trade policy is regressive through the expenditure channel as it disproportionately raises the cost of consumption for poorer households, while it is progressive through the earnings channel in urban areas and neutral in rural areas. The net distributional effect through these two channels is estimated to be regressive, and elimination of current trade protection structure is expected to reduce inequality. These results indicate that a trade protection structure that designed as a progressive trade policy through the earnings channel may induce price effects that are regressive through the expenditure channel.

One reason to be concerned about income inequality is the idea that people not only care about their own absolute income, but also their income relative to various reference groups (e.g. co-workers, friends, neighbors, relatives, etc.). We use Canadian linked employer-employee data to estimate the casual effect of co-worker pay on a worker's reported job and pay satisfaction. Since worker satisfaction can affect the worker's productivity, organizational commitment, turnover, creativity and innovation, as well as the firm's productivity and profitability, this is an issue that requires more attention and careful examination. In models that control for a rich set of workplace characteristics, we find that coworker pay has a large positive and significant effect on both pay and job satisfaction. In our preferred models with establishment-level fixed effects, the effect of coworker pay on pay satisfaction is half as large, and the effect on job satisfaction completely disappears, suggesting that part (all) of what previous studies attribute to the effect of coworker pay on worker pay (job) satisfaction is driven by unobserved heterogeneity across firms or establishments. Our results also suggest that the effect of coworker pay on worker satisfaction is much stronger for workers who leave their job during the following year. Finally, we find that while coworker pay has a positive effect on pay satisfaction among Canadian-born whites, it has a negative effect among immigrants and Canadian-born visible minorities.

This paper documents the sources of data used in the construction of the estimates of the Levy Institute Measure of Economic Wellbeing (LIMEW) for the years 1959, 1972, 1982, 1989, 1992, 1995, 2000, 2001, 2004, 2007, 2010, and 2013. It also documents the methods used to combine the various sources of data into the synthetic dataset used to produce each year's LIMEW estimates.

Peru has made great progress in reducing poverty and inequality in the past decade alongside high economic growth. Albeit this progress, the incidence of poverty and inequality remain high. This paper examines the distributional and poverty impact of the public tax and transfer system in Peru. It applies an extended income approach that accounts for the value of publicly-provided health, education and childcare services. Accounting for public services is important since unequal access to basic services is a main development challenge for low and middle income countries. We find that public social spending reduces overall inequality by almost 7 Gini points. This reduction is mainly driven by in-kind benefits while the impact of taxation and direct cash transfers is small. Income differentials within regions explain approximately four fifths of overall inequality compared to diffierences between regions, which explain about one fifth. This ratio remains largely unaffected by public redistribution. Mean levels of welfare vary widely across regions. This is also because social spending achieves litte poverty reduction. It decreases absolute poverty by 2-3 percentage points in terms of monetary income and up to 9 percentage points or 25% when accounting for public service use. The largest share of the poor, over 50%, are not reached by social assistance. To tackle poverty more effectively, transfer levels and coverage need to be increased. Current policies seem insuffcient to achieve a more equitable income distribution.

We examine how in-kind transfers provided by local governments affect economic inequality. The allocation of in-kind transfers to households and the adjustment for differences in needs are derived from a model of local government spending behavior. The model distinguishes between fixed and variable costs in production as well as mandatory programmatic spending components versus discretionary spending on different service sectors and target groups. To estimate the model, we combine Norwegian data from municipal accounts and administrative registers for the period 1982-2013. We find that economic inequality is considerably lower when taking in-kind transfers into account. While the poor benefit from receiving a relatively large share of public services, the equalizing effect of in-kind transfers tends to be smaller than the equalizing contribution from public cash transfers. When examining the time trends in inequality, we find that local governments attenuated the growth in cash income inequality by re-allocating in-kind transfers to low-income families. This reduction in inequality is mostly due to changes in spending priorities across service sectors and target groups, whilst the contribution from re-allocation of resources across municipalities is much smaller. Vi undersøker hvordan fordelingen av individrettete kommunale tjenester påvirker økonomisk ulikhet. Verdsettingen, behovsjusteringen og allokeringen av kommunale tjenester til hushold er basert på en modell for kommunenes økonomiske atferd. Modellen allokerer bundne kostnader og frie disponible inntekter til ulike tjenesteytende sektorer og målgrupper, og den skiller mellom faste og variable kostnader i produksjonen. For å estimere modellen kombinerer vi data fra kommunale regnskaper og administrative registre for perioden 1982-2013. Vi finner at økonomisk ulikhet er betydelig lavere når vi tar hensyn til verdien av mottatte kommunale tjenester. Selv om de fattige mottar en relativt stor andel av de kommunale tjenestene, viser analysen at de kommunale tjenestene virker mindre utjevnende enn offentlige kontantoverføringer. Når vi undersøker utviklingen i ulikhet over tid, finner vi at kommunene har bidratt til å dempe økningen i inntektsulikhet gjennom reallokering av tjenester til lavinntektsfamilier. Denne reduksjonen i ulikhet skyldes for det meste endringer i prioriteringene mellom tjenestesektorer og målgrupper, og i mindre grad omfordeling av ressurser mellom kommunene

Nicht erst seit der vergangenen Bundestagswahl gibt es in Deutschland eine öffentliche Diskussion, wie es hierzulande um die soziale Gerechtigkeit bestellt ist. In der Debatte wird hierbei oft auf die Entwicklung der Einkommensungleichheit rekurriert. Um die Gerechtigkeitsfrage sinnvoll zu beantworten, ist ein Vergleich mit historischen oder internationalen Referenzpunkten jedoch nur bedingt zielführend. Vielmehr gilt es zunächst zu klären, was unter Gerechtigkeit verstanden werden soll. Paolo Brunori, University of Florence, Paul Hufe, ifo Institut, und Daniel Mahler, University of Copenhagen, stellen ein neues Messkonzept für ein weit verbreitetes Gerechtigkeitsideal vor: die Idee der Chancengerechtigkeit. Danach beinhaltet Chancengerechtigkeit, dass die Möglichkeit zur Einkommenserzielung nicht von Faktoren abhängt, die sich dem persönlichen Einfluss entziehen. Nach den Berechnungen der Autoren lassen sich etwa 25% der Einkommensungleichheiten auf die ungleiche Verteilung von Chancen zurückführen, wobei der Lebenserfolg vor allem von der Bildung und dem Beruf des Vaters beeinflusst wird.

This paper provides a methodology to compare profiles of income rank volatility over time and across distributions. While most of the existing measures are affected by changes in the marginal distributions, this paper proposes a framework that based on individuals’ relative position in the distribution results to be neutral to the structural changes that occur in the economy. Applying this approach to investigate rank volatility in Germany and the US over three decades, we show that while poorer individuals are the most volatile in both countries, the volatility trend of the middle class marks the difference between these two countries.

We analyze the effects of macroeconomic fluctuations, as well as episodes of financial instability and inflation, on inequality indicators in Chile for the period 1960-2014. The relationship between episodes of crisis and fluctuations on levels of inequality are estimated from an event study, finding that they are related to fluctuations in inequality. In addition, we perform econometric estimates where inequality indicators relate to different macroeconomic variables and educational performance. The main conclusions are that banking and inflation crises, as well as periods of severe cyclical contractions, tend to increase the levels of inequality in Chile.

Laut Definition der EU gilt als arm, wer aufgrund von Ressourcenmangel Entbehrungen im Lebensstandard hinnehmen muss. Alternativ dazu lässt sich Armut auch über einen Mangel an Verwirklichungschancen messen. Für den multidimensionalen Armutsindex werden weitere Dimensionen betrachtet. Insofern können Einschränkungen in Lebensverhältnissen besser dargestellt werden. Armut wird in der öffentlichen Diskussion oftmals mit relativer Einkommensarmut gleichgesetzt. Armut ausschließlich über ein relativ geringes Einkommen zu definieren, greift aber zu kurz. Die Armutsgefährdungsquote oder der Anteil der Personen, die weniger als 60 Prozent des haushaltsbezogenen Medianeinkommens verdienen, ist vielmehr ein spezielles Maß für Einkommensungleichheit. Die Tschechische Republik schneidet bei diesem Indikator am besten ab, die baltischen Länder, Griechenland, Spanien, Rumänien und Bulgarien mit Quoten zwischen 21 und 25 Prozent am schlechtesten. Deutschland liegt mit einer leicht unterdurchschnittlichen Armutsgefährdungsquote im Mittelfeld. Laut Definition der EU gilt als arm, wer aufgrund von Ressourcenmangel Entbehrungen im Lebensstandard hinnehmen muss. Die sogenannte konsistente Armut ergibt sich als Schnittmenge von relativer Einkommensarmut und materieller Entbehrung und erfüllt somit die EU-Definition. Alternativ lässt sich Armut auch über einen Mangel an Verwirklichungschancen messen. Betrachtet werden hier beispielhaft die Dimensionen Einkommen, materielle Deprivation, Bildung, Erwerbstätigkeit, Wohnumfeld und Unterkunft sowie Gesundheit. Die Indikatoren dieser Dimensionen werden zu einem multidimensionalen Armutsindex zusammengefasst. Dabei schneiden Norwegen, Schweden und die Schweiz am besten, Bulgarien, Rumänien und Griechenland am schlechtesten ab. Es zeigt sich eine sehr ähnliche Reihenfolge wie bei der konsistenten Armut. In Deutschland ist die Armutsquote auf Basis beider Maße deutlich kleiner als im EU-Durchschnitt. Auch die subjektiv empfundene Einkommensarmut ist eng mit den beiden multidimensionalen Armutsmaßen korreliert. Diese Ansätze sind daher besser geeignet, Einschränkungen in den Lebensverhältnissen darzustellen, und sie eignen sich auch besser als Zielgröße für eine Politik gegen Armut. When discussed in public, poverty is often equated with relative income poverty. However, to define poverty exclusively in terms of low income is to see it too narrowly. The at-risk-of-poverty rate, the proportion of the population earning less than 60 per cent of the median household income, is actually a very specific measure of income inequality. The Czech Republic fares best on this indicator, while with rates between 21 and 25 per cent the Baltic states, Greece, Spain, Romania and Bulgaria come out worst. Germany has a slightly below-average at-risk-of-poverty rate, putting it in the middle of the ranking. The EU defines as poor anyone forced by lack of resources to accept a lower standard of living. So-called consistent poverty is calculated as a combination of relative income poverty and material deprivation and therefore meets the EU definition. Alternatively, poverty can be measured as a lack of capabilities and opportunity for self-fulfilment. In the present study, the factors considered are income, material deprivation, education, gainful employment, housing and housing environment, and health, with the indicators for these factors being summarized in a multi-dimensional poverty index. The index ranks Norway, Sweden and Switzerland highest, with Bulgaria, Romania and Greece bring up the rear, a result similar to that for consistent poverty. In Germany, the poverty rate based on the two measures is considerably lower than the EU average. Subjective income poverty also correlates closely with the two multidimensional poverty measures. This makes the latter more suitable for depicting reduced circumstances and also more appropriate for setting policy goals in the fight against poverty.

"Disability insurance - the insurance against the loss of the ability to work - is a substantial part of social security expenditures in many countries. The benefit recipiency rates in disability insurance vary strikingly across European countries and the US. This paper investigates the extent of, and the causes for, this variation, using econometric analyses based on new data from SHARE, ELSA and HRS. We show that even after controlling for differences in the demographic structure and health status these differences remain. This holds for a broad set of objective and subjective physical and mental health measures as well as for contemporal, intertemporal and life-course specifications of health, including measures of childhood health. In turn, indicators of disability insurance generosity explain 75% of the cross-national variation. We conclude that it is not health but the country-specific design of early retirement and labor market institutions, and especially disability insurance rules, which explain the observed cross-country variation in the receipt of disability benefits." (Author's abstract, IAB-Doku) ((en))

Using comparable fiscal incidence analysis, this paper examines the impact of fiscal policy on inequality and poverty in 25 countries for around 2010. Success in fiscal redistribution is driven primarily by redistributive effort (share of social spending to GDP in each country) and the extent to which transfers/subsidies are targeted at the poor and direct taxes targeted at the rich. While fiscal policy always reduces inequality, this is not the case with poverty. Fiscal policy increases poverty in 4 countries using a US$1.25/day PPP poverty line, in 8 countries using a US$2.50/day line, and in 15 countries using a US$4/day line (over and above market income poverty). Net direct taxes are always equalizing and net indirect taxes are equalizing in 17 of the 25 countries. While spending on pre-school and primary school is pro-poor (i.e. the per capita transfer declines with income) in almost all countries, pro-poor secondary school spending is less prevalent, and tertiary education spending tends to be progressive only in relative terms (i.e. equalizing but not pro-poor). Health spending is always equalizing.

We analyze the potential influence of a number of factors on the distribution of equivalized net incomes in Germany over the period 2005/2006 to 2010/11. While income inequality considerably increased in the years before 2005/2006, this trend was stopped after 2005/2006. Among many other factors, we consider the role of the employment boom and the development of inequality in wage incomes after 2005/2006. Our results suggest that, despite further increases in wage inequality, inequality in equivalized net incomes did not increase further after 2005/2006 because increased within-year employment opportunities compensated otherwise rising inequality in annual labour incomes. On the other hand, income inequality did not fall in a more marked way after 2005/2006 because also the middle and the upper part of the distribution benefitted from the employment boom. Other factors, such as changing household structures, population aging and changes in the tax and transfer system had no important effects on the distribution. Finally, we find little evidence that the distribution of equivalized net incomes was affected in any important way by the financial crisis and the subsequent great recession.

This paper analyses the relationships between various measures of income inequality and variables describing population health and social outcomes at the regional level in the EU. Differences between the Central and East European new EU Member States (NMS) and non-NMS EU countries are highlighted. By applying fixed and random effects and cross-region regressions, we found negative relationships between income inequality and life expectancy, infant mortality, standardised death rates on various causes, rates of violent and property crime, rates of non-activity and early leave from education of young persons. The results indicate that redistributive policies might be an effective measure to reduce social harm and improve population health.

Using newly comprehensive data and tools from the Global Consumption and Income Project or CGIP, covering most of the world and five decades, we present a portrait of the changing global distribution of consumption and income and discuss its implications for our understanding of inequality, poverty, inclusivity of growth and development, world economic welfare, and the emergence of a global "middle class". We show how regional distributions of income and consumption have evolved very differently over time. We also undertake sensitivity analysis to quantify the impact of various choices made in database construction and analysis. We find that levels of consumption and income have increased across the distribution, that the global distribution has become more relatively equal due to falling inter-country relative inequality, and that by some measures global poverty has declined greatly but by others it has hardly declined at all, even over the fifty years. The global middle class has grown markedly in certain countries but only slightly worldwide. Most of the marked changes have occurred after 1990. China's rapid economic growth is by far the most important factor underlying almost all of them, notwithstanding sharply increasing inequalities within the country. Most improvements outside of China are associated with rapid developing country growth after 2000, and are of unknown durability. Country-experiences vary widely; there is for instance some evidence of "inequality convergence" with previously more equal countries becoming less equal over time and the obverse. We provide support for previous findings (e.g. the replacement of the global "twin peaks" by a unimodal distribution) but also arrive at some conclusions that overthrow old "stylized facts" (e.g. that the Sub-Saharan African countries, and not Latin American ones, have the highest levels of inequality in the world, when measured using standardized surveys). The GCIP provides a resource for ongoing analysis, and forecasting, of developments in the world distribution.

Since Aristotle, a vast literature has suggested that economic inequality has important political consequences. Higher inequality is thought to increase demand for government income redistribution in democracies and to discourage democratization and promote class conflict and revolution in dictatorships. Most such arguments crucially assume that ordinary people know how high inequality is, how it has been changing, and where they fit in the income distribution. Using a variety of large, cross-national surveys, we show that, in recent years, ordinary people have had little idea about such things. What they think they know is often wrong. Widespread ignorance and misperceptions of inequality emerge robustly, regardless of the data source, operationalization, and method of measurement. Moreover, we show that the perceived level of inequality – and not the actual level – correlates strongly with demand for redistribution and reported conflict between rich and poor. We suggest that most theories about political effects of inequality need to be either abandoned or reframed as theories about the effects of perceived inequality.

We provide an overview of microsimulation approaches to assess the effects of policy on the income distribution. We focus mainly on the role of tax-benefit policies and review the concept of microsimulation and how it contributes to the analysis of the income distribution in general and policy evaluation in particular. We consider the main challenges and limitations and discuss directions for future developments.