inequalityWorldreportfaCundo alVaredo luCas ChanCel thomas piketty emmanuel saez Gabriel zuCmanCoordinated byWorld inequality report 2018WId.world fellows:the report ultimately relies on the data collection, production and harmonization work carried out by more than a hundred Wid.world fellows located over five continents and contributing to the World Wealth and income database (visit wid.world/team for more information). Analyses presented in the report reflect the views of the reports editors and not necessarily those of Wid.world fellows. Creative Commons licence 4.0 - CC by-nC-sa 4.0World inequality lab, 2017Design: Grand Krü, BerlinCover artwork based on a photograph by Dimitri Vervitsiotis / Getty Imagesthis report emphasizes recent research articles written by: facundo alvaredolydia assouadanthony b. atkinsonCharlotte bartelsthomas blanchetlucas Chancelluis estévez-bauluzJuliette fournierbertrand GarbintiJonathan Goupille-lebretClara martinez-toledanosalvatore morelliMarc MorganDelphine Nougayrèdefilip novokmetthomas pikettyemmanuel saezLi YangGabriel zucmanWritten and coordinated by:facundo alvaredolucas Chancelthomas pikettyemmanuel saezGabriel zucmanGeneral coordinator:lucas Chancelreport research team:thomas blanchetrichard Clarke leo Czajkaluis estévez-bauluzamory GethinWouter lendersIn memory of Tony Atkinson (19442017)Codirector of the World top incomes database (2011-2015) and of Wid.world (2015-2017) Contents . 4exeCutiVe summary . 7introduCtion . 22Part ithe Wid.World proJeCt and the measurement of eConomiC inequality .24Part iitrends in Global inCome inequality .382.1 Global income inequality dynamics . 402.2 trends in income inequality between countries . 582.3 trends in income inequality within countries . 672.4 united states . 782.5 france . 932.6 Germany. 1012.7 China . 1062.8 russia . 1132.9 india . 1232.10 middle east . 1312.11 brazil . 1382.12 south africa . 145Part iiipubliC Versus priVate Capital dynamiCs . 1543.1 Wealth-income ratios across the world . 1563.2 The evolution of aggregate wealth-income ratios in developed countries . 1653.3 Comparing the experiences of former communist states . 1743.4 Capital Accumulation, Private Property, and Rising Inequality in China . 1803.5 the rise of private property in russia . 187ContentsWorld inequality report 20184Part iVtrends in Global Wealth inequality . 1964.1 Global wealth inequality: trends and projections . 1984.2 Comparing trends in personal wealth inequality across the world . 2054.3 united states . 2124.4 france . 2194.5 spain . 2304.6 United Kingdom . 241Part VtaCklinG eConomiC inequality . 2485.1 What is the future of global income inequality? . 2505.2 Tackling rising inequality at the top: the role of progressive taxation . 2565.3 Tax policy in a global environment: the case for a global financial register . 2635.4 Tackling inequality at the bottom: the need for more equal access to education and good paying jobs . 2685.5 A message from the past: let governments invest in the future . 278ConClusion . 286appendix . 291World inequality report 2018 5ContentsexeCutiVe summaryi. what is the aim of the world inequality rePort 2018? The World Inequality Report 2018 relies on a cutting-edge methodology to measure income and wealth inequality in a systematic and transparent manner. By developing this report, the World Inequality Lab seeks to fill a democratic gap and to equip various actors of society with the necessary facts to engage in informed public debates on inequality. the objective of the World Inequality Report 2018 is to contribute to a more informed global democratic debate on economic inequality by bringing the latest and most complete data to the public discussion. economic inequality is widespread and to some extent inevitable. It is our belief, however, that if rising inequality is not prop-erly monitored and addressed, it can lead to various sorts of political, economic, and social catastrophes. Our objective is not to bring everyone into agreement regarding inequality; this will never happen, for the simple reason that no single scientific truth exists about the ideal level of inequality, let alone the most socially desirable mix of policies and institutions to achieve this level. ultimately, it is up to public deliberation, and political institutions and their processes to make these difficult deci-sions. but this deliberative process requires more rigorous and transparent information on income and wealth. to equip citizens to make such decisions, we also seek to relate macroeconomic phenomenonsuch as nationalization and privatization policies, capital accumulation, and the evolution of public debtto micro-economic trends in inequality focused on indi-viduals earnings and government transfers, personal wealth, and debt. Reconciling macro and microeconomic inequality data is not a straightforward exercise given that many countries do not publicly release, or may not even produce, detailed and consistent income and wealth inequality statistics. standard measures of inequality often rely on household surveys, which routinely underestimate the income and wealth of individuals at the top of the social ladder. to overcome current limitations, we rely on a groundbreaking methodology which combines in a systematic and transparent manner all data sources at our disposal: national income and wealth accounts (including, when possible, offshore wealth estimates); household income and wealth surveys; fiscal data coming from taxes on income; inheritance and wealth data (when they exist); and wealth rankings. The series presented in this report rely on the collective efforts of more than a hundred researchers, covering all conti-nents, who contribute to the WID.world database. All the data are available online on wir2018.wid.world and are fully repro-ducible, allowing anyone to perform their own analysis and make up their own mind about inequality.exeCutIve summaryWorld inequality report 20188ii. what are our new findings on global inCome inequality? We show that income inequality has increased in nearly all world regions in recent decades, but at different speeds. The fact that inequality levels are so different among countries, even when countries share similar levels of develop-ment, highlights the important roles that national policies and institutions play in shaping inequality. Income inequality varies greatly across world regions. It is lowest in europe and highest in the middle east. Inequality within world regions varies greatly. In 2016, the share of total national income accounted for by just that nations top 10% earners (top 10% income share) was 37% in europe, 41% in China, 46% in russia, 47% in us-Canada, and around 55% in sub-Saharan Africa, Brazil, and india. in the middle east, the worlds most unequal region according to our estimates, the top 10% capture 61% of national income (Figure E1). In recent decades, income inequality has increased in nearly all countries, but at different speeds, suggesting that institutions and policies matter in shaping inequality. since 1980, income inequality has increased rapidly in north america, China, India, and Russia. Inequality has grown moderately in europe (Figure e2a). from a broad historical perspective, this increase in inequality marks the end of a postwar egali-tarian regime which took different forms in these regions.0%10%20%30%40%50%60%70%37%41%46%47%54%55% 55%61%Middle EastIndiaBrazilSub-SaharanAfricaUS-CanadaRussiaChinaEuropeIn 2016, 37% of national income was received by the Top 10% in Europe against 61% in the Middle-East.Source: WID.world (2017). See wir2018.wid.world for data series and notes.Share of national income (%)Figure e1 top 10% national income share across the world, 2016World inequality report 2018 9exeCutIve summary There are exceptions to the general pattern. in the middle east, sub-saharan africa, and brazil, income inequality has remained relatively stable, at extremely high levels (Figure e2b). Having never gone through the postwar egalitarian regime, these regions set the world “inequality frontier.” the diversity of trends observed across countries since 1980 shows that income inequality dynamics are shaped by a variety of national, institutional and political contexts. this is illustrated by the different trajec-tories followed by the former communist or highly regulated countries, China, India, and russia (Figure e2a and b). the rise in inequality was particularly abrupt in russia, moderate in China, and relatively gradual in India, reflecting different types of deregula-tion and opening-up policies pursued over the past decades in these countries. The divergence in inequality levels has been particularly extreme between Western Europe and the united states, which had similar levels of inequality in 1980 but today are in radically different situations. While the top 1% income share was close to 10% in both regions in 1980, it rose only slightly to 12% in 2016 in Western europe while it shot up to 20% in the united states. meanwhile, in the united states, the bottom 50% income share decreased from more than 20% in 1980 to 13% in 2016 (Figure e3). the income-inequality trajectory observed in the United States is largely due to massive educational inequalities, combined with a tax system that grew less progressive despite a surge in top labor compensation since the 1980s, and in top capital incomes in the 2000s. Continental europe meanwhile saw a lesser decline in its tax progressivity, while wage inequality was also moderated by educational and wage-setting policies that were relatively more favorable to low- and middle-income groups. In both regions, income inequality between men and women has declined but remains particularly strong at the top of the distribution.In 2016, 47% of national income was received by the top 10% in US-Canada, compared to 34% in 1980.Source: WID.world (2017). See wir2018.wid.world for data series and notes.RussiaChinaIndiaUS-CanadaEuropeShare of national income (%)20%30%40%50%60%20152010200520001995199019851980Figure e2a top 10% income shares across the world, 19802016: rising inequality almost everywhere, but at different speedsexeCutIve summaryWorld inequality report 201810How has inequality evolved in recent decades among global citizens? We pro-vide the first estimates of how the growth in global income since 1980 has been distributed across the totality of the world population. The global top 1% earners has captured twice as much of that growth as the 50% poorest individuals. The bottom 50% has nevertheless enjoyed important growth rates. The global mid-dle class (which contains all of the poorest 90% income groups in the EU and the United States) has been squeezed.at the global level, inequality has risen sharply since 1980, despite strong growth in China. The poorest half of the global popula-tion has seen its income grow significantly thanks to high growth in Asia (particularly in China and india). however, because of hig