Determinants of Wealth and Wealth Inequality (2024)

FAQs

What are the determinants of wealth inequality? ›

Interest rates, inflation, and changes in income affect wealth inequality. Income growth is especially helpful for lower wealth individuals. Inflation appears to benefit middle-wealth households. Expansionary monetary policy may worsen wealth inequality.

To reduce income inequality, governments and private sectors must address its various causes, including discrimination, unfair taxation, wage stagnation, and more that lead to large imbalances in compensation.

This may be extreme poverty, conspicuous wealth or consumption, the status of particular groups, lack of access to particular goods and services, such as education, health or justice, or just an uneven income distribution.

Some of key factors behind the increase in within-country income inequality noted in the literature include technological progress, globalization, commodity price cycles, and domestic economic policies such as redistributive fiscal policies, labor and product market policies.

Wealth inequality is the unequal distribution of assets among individuals or groups within a society or country. It encompasses not only the lack of financial resources but also the lack of social capital¹, which allows an individual to access the networks and opportunities necessary to live a dignified life.

These determinants are education, income and wealth, employment, health systems and services, housing, the physical environment, transporation, the social environment, and public safety (Table 3-1 provides a brief definition of each).

Excessive inequality can erode social cohesion, lead to political polarization, and lower economic growth. Learn more about the inequality, its causes and consequences and how the IMF helps countries in tackling inequality.

Inequalities are not only driven and measured by income, but are determined by other factors - gender, age, origin, ethnicity, disability, sexual orientation, class, and religion. These factors determine inequalities of opportunity which continue to persist, within and between countries.

Wealth inequality within countries is typically much higher than income inequality. It has followed a rising trend across countries since around 1980, similar to income inequality. Higher wealth inequality feeds higher future income inequality through capital income and inheritance.

Income inequality is a global issue with several causes, including historical racism, unequal land distribution, high inflation, and stagnant wages.

What are the social determinants of inequality? ›

The social determinants of health are shaped by the distribution of money, power and resources and are mostly responsible for health inequities – the health inequalities that are unfair and avoidable. Social determinants include but are not limited to: socioeconomic status. education. housing.

Significant inequalities in income and wealth are found when specific socially defined categories of people are compared. Among the most pervasive of these variables are sex/gender, race, and ethnicity as they contribute to great factors in society as they form and limit many parts of the economy.

Factors that contribute to this gap in wages are things such as level of education, labor market demand and supply, gender differences, growth in technology, and personal abilities. The quality and level of education that a person has often corresponds to their skill level, which is justified by their income.

Income is the payment families receive from work or investments. Wealth is the value of a family's accrued assets. Both measurements reflect an uneven distribution that continues putting Black and Brown children at risk. From 1979-2019, income inequality in the United States grew by 25%.

It outlines four criteria for measuring inequality: anonymity, population, relative income, and Dalton principles. It also describes the Lorenz curve and five measures of inequality: range, Kuznets ratio, mean absolute deviation, coefficient of variation, and Gini coefficient.

While inequality between skilled and unskilled workers is due to differences in educational attainment, within-group inequality is due to differences in productivity across firms. Workers in more successful firms are paid more than their peers with the same level of education and skills in less successful firms.

In 2008, the World Health Organization Commission on Social Determinants of Health report Closing the Gap in a Generation took a view that health inequities were largely attributable to inequalities in the distribution of power, income, goods, and services, as well as the consequent disparities in people's living ...

Economists use various metrics for measuring income inequality. Here, the most commonly used measures—the Lorenz curve, the Gini coefficient, decile ratios, the Palma ratio, and the Theil index—are discussed in relation to their benefits and limitations.