The National Scale of Income Inequality in Unequal People by Branko Milanović

Branko Milanovic’s, ”Unequal People", examines how income inequality operates on a national scale. Milanovic works through his essay by describing the three major concerns that economists have pertaining to income distribution. Milanovic starts off by emphasizing how income inequality is reactive to the movement of income level, and proceeds to discuss the relationship between income inequality and societal efficiency. Finally, Milanovic comments on the ethical aspects ofthe economy by deciphering when it is appropriate for government to intervene into the economy. In Milanovic's second part ofhis essay, he explains the means by which levels of inequality should be analyzed and compared. Specifically, Milanovic introduces the Gini Index and acknowledges it for establishing the average inequality between individuals in a given country.

The Gini Index measures wealth distribution on a scale ofo»1:o represents perfect equality, while an index ofi implies perfect inequality. In Simon Kuznet’s 1955, “Inverted-U Hypothesis", Kuznet’s U-graph analyzes economic inequality against income per capita over the course ofeconomic development, Kuznet, being one ofthe first real theorists to analyze income distribution using income data, illustrated how an economy develops from an agricultural based economy to an industrialized, urban one. Kuznet argued that economies still in early development stages, have both a low level ofincome and inequality in their societies.

For instance. Niger has a rural based economy with the exports ofraw commodities and minerals to the world markets. Despite Niger being considered one ofthe poorest countries in the world, they have relatively low income inequality. Niger‘s Gini coefficient is 34 as ofzoo7. The income gap is also relatively low in some developed societies. In a modern, socialist country like Norway. the government has a larger role in society. Norway’s Gini index is at .25, When the government intervenes through regulations and taxes, they’re essentially playing a redistributive role to lessen inequality This makes education, housing, and the overall well being ofthe nation more widespread. Where we see the most inequality, in actuality, is when a country is transitioning.

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This often occurs when a developing country is switching from its rural-based economy to an urban-centric one. This is what is happening in South Africa. There is a huge distinction between the farm and city life. and income is increasingly becoming more concentrated in the top decile, Since 1993, South Africa’s Gini coefficient has increased from ,66 to ,7, and the gap is only getting widen. Moreover, Kuznet concluded that income equality is most prevalent at the poles of society and that a community will always face economic disparities between groups ofpeople when developing.

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