In economics, income distribution covers how a country's total GDP is distributed amongst its population. Economic theory and economic policy have long seen income and its distribution as a central concern. Classical economists such as Adam Smith (1723-1790), Thomas Malthus (1766-1834), and David Ricardo (1772-1823) concentrated their attention on factor income-distribution, that is, the distribution of income between the primary factors of production ( land, labour and capital). Modern economists have also addressed issues of income distribution, but have focussed more on the distribution of income across individuals and households. Important theoretical and policy concerns include the balance between income inequality and economic growth, and their often inverse relationship.
The concept of inequality is distinct from that of poverty and fairness. Income inequality metrics (or income distribution metrics) are used by social scientists to measure the distribution of income, and economic inequality among the participants in a particular economy, such as that of a specific country or of the world in general. While different theories may try to explain how income inequality comes about, income inequality metrics simply provide a system of measurement used to determine the dispersion of incomes.
Causes of income inequality and of levels of equality/inequality include: tax policies, other economic policies, labor union policies, Federal Reserve monetary policies & fiscal policies, the market for labor, abilities of individual workers, technology and automation, education, globalization, gender bias, racism, and culture.
Using Gini coefficients, several organizations, such as the United Nations (UN) and the US Central Intelligence Agency (CIA), have measured income inequality by country. The Gini index is also widely used within the World Bank. It is an accurate and reliable index for measuring income distribution on a country by country level. The Gini index measurements go from 0 to 1 for 1 being perfect inequality and 0 being perfect equality. The world Gini index is measured at 0.52 as of 2016.
Standard economic theory stipulates that inequality tends to increase over time as a country develops, and to decrease as a certain average income is attained. This theory is commonly known as the Kuznets curve after Simon Kuznets. However, many prominent economists disagree with the need for inequality to increase as a country develops. Further, empirical data on the proclaimed subsequent decrease of inequality is conflicting.
There are two ways of looking at income inequality, within country inequality (intra-country inequality) - which is inequality within a nation; or between country inequality (inter-country inequality) which is inequality between countries.
According to intra-country inequality at least in the OECD countries, a May 2011 report by OECD stated that the gap between rich and poor within OECD countries (most of which are "high income" economies) "has reached its highest level for over 30 years, and governments must act quickly to tackle inequality".
Furthermore, increased inter-country income inequality over a long period is conclusive, with the Gini coefficient (using PPP exchange rate, unweighted by population) more than doubling between 1820 and the 1980s from .20 to .52 (Nolan 2009:63). However, scholars disagree about whether inter-country income inequality has increased (Milanovic 2011), remained relatively stable (Bourguignon and Morrison 2002), or decreased (Sala-i-Martin, 2002) since 1980. What Milanovic (2005)  calls the "mother of all inequality disputes" emphasizes this debate by using the same data on Gini coefficient from 1950-2000 and showing that when countries' GDP per capita incomes are unweighted by population income inequality increases, but when they are weighted inequality decreases. This has much to do with the recent average income rise in China and to some extent India, who represent almost two-fifths of the world. Notwithstanding, inter-country inequality is significant, for instance as a group the bottom 5% of US income distribution receives more income than over 68 percent of the world, and of the 60 million people that make up the top 1% of income distribution, 50 million of them are citizens of Western Europe, North America or Oceania (Milanovic 2011:116,156).
In a TED presentation shown here, Hans Rosling presented the distribution and change in income distribution of various nations over the course of a few decades along with other factors such as child survival and fertility rate.
As of 2018, Albania has the smallest gap in wealth distribution with Zimbabwe having the largest gap in wealth distribution.
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In the United States, income has become distributed more unequally over the past 30 years, with those in the top quintile (20 percent) earning more than the bottom 80 percent combined.
Inequality in the UK has been very high in the past, and did not change much until the onset of industrialization. Incomes used to be remarkably concentrated pre-industrial evolution: up to 40% of total income went into the pockets of the richest 5%. In the more recent years income distribution is still an issue. The UK experienced a large increase in inequality during the 1980s--the incomes of the highest deciles increase while everyone else was stagnant. Uneven growth in the years leading up to 1991 meant further increases in inequality. Throughout the 1990s and 2000s, more even growth across the distribution meant little changes in inequality, with rising incomes for everybody. In sight of Brexit, there is more predicted income distribution discrepancies between wages.
[...] inequality continues to be a robust and powerful determinant both of the pace of medium-term growth and of the duration of growth spells, even controlling for the size of redistributive transfers. [...] [T]here is surprisingly little evidence for the growth-destroying effects of fiscal redistribution at a macroeconomic level. [...] [F]or non-extreme redistributions, there is no evidence of any adverse direct effect. The average redistribution, and the associated reduction in inequality, is thus associated with higher and more durable growth.