Factors of Inequality

Factors of Inequality What determines income and wealth inequality? Understanding the causes is important for forecasting trends and evaluating policies.

Skill-Biased Technical Change SBTC: technologies increase demand for skilled labor, reducing it for unskilled labor. Result: rise in the education premium, polarization of the labor market.

Globalization Impact: Competition with cheap labor Offshoring of production Benefits for capital and high-skilled workers

Education Education premium: returns to education have increased. Access: unequal access to quality education reproduces inequality.

Institutions Labor market institutions: Minimum wage Trade unions Labor legislation The weakening of these institutions is associated with the rise in inequality.

Markets and “Superstars” Winner-take-all markets: technology enables the best to serve the global market. Examples: sports, entertainment, tech entrepreneurs.

Wealth vs income Wealth inequality is usually higher than income inequality. Piketty (r > g): if the return on capital exceeds the growth of the economy, wealth accumulates.

For the investor Sectoral implications: growth in luxury, stagnation in the mass market. Political economy: trends in inequality influence politics (populism, regulation). Human capital: education and training sectors — long-term beneficiaries.