In 1790, Philadelphia was the largest city in the newly formed United States, and one of its wealthiest residents was a merchant named Elias Hasket Derby — reputed to be the first American millionaire. His fortune of approximately $1 million was almost unimaginably vast in a country where the average household earned perhaps $100 per year. Derby was roughly 10,000 times wealthier than his average fellow citizen.
Today, Elon Musk's net worth has exceeded $300 billion. The median American household net worth is approximately $170,000. That is a ratio of approximately 1.7 million to one. In two and a half centuries, the gap between the richest American and the typical American grew by a factor of roughly 170.
Something has been systematically concentrating wealth. Understanding why is not merely an academic exercise: inequality shapes educational opportunity, political power, social mobility, health outcomes, and the stability of democratic institutions. The mechanisms that drive wealth concentration are knowable, and so are many of the policy responses that have historically been effective at moderating it.
"The history of the distribution of wealth has always been deeply political, and it cannot be reduced to purely economic mechanisms." — Thomas Piketty, Capital in the Twenty-First Century (2014)
Key Definitions
Income inequality — The disparity in income (earnings, wages, returns on investments) across individuals or households in an economy. Measured by Gini coefficient, income shares, or other distributional statistics.
Wealth inequality — The disparity in accumulated assets (financial wealth, property, equity stakes) across individuals or households. Generally more extreme than income inequality because wealth accumulates over time and across generations.
Gini coefficient — A statistical measure of inequality ranging from 0 (perfect equality — everyone has the same income or wealth) to 1 (perfect inequality — one person has everything). The US Gini for income was approximately 0.39 in 2022; for wealth it is approximately 0.85 — among the most unequal in the developed world.
Piketty's r > g thesis — Thomas Piketty's central argument in Capital in the Twenty-First Century (2014): when the rate of return on capital (r) exceeds the rate of economic growth (g), wealth concentration naturally increases over time. Capital owners' wealth grows faster than the overall economy, meaning their share of total wealth grows. Piketty argues this is the normal state of capitalism, interrupted only by the destruction of capital (World Wars) and redistributive policies of the mid-20th century.
Capital — In the economic sense used by Piketty and other inequality researchers: all forms of non-human wealth that can be owned and produce income — financial assets, real estate, business ownership stakes, intellectual property. Capital is distinguished from labor income (wages and salaries earned through work).
Capital-labor split — The division of national income between capital income (returns to capital owners: profits, dividends, rent, interest) and labor income (wages and salaries). The labor share of national income has declined in most developed economies since the 1970s, corresponding to growing capital share and rising inequality.
Skill-biased technological change — The hypothesis that technological progress has disproportionately increased demand for high-skilled workers (those who can work with and direct technology) while reducing demand for routine manual and cognitive tasks (that technology can perform). This increases wage premiums for education and skill, widening the wage distribution.
Winner-take-all markets — Markets where small advantages in talent, network effects, or platform dominance translate into extremely large differences in outcomes. In many digital and knowledge economy markets, the top performers earn enormous multiples of the median performer's income. The superstar effect (Sherwin Rosen, 1981) describes this dynamic.
Intergenerational wealth transfer — The passing of accumulated wealth from parents to children through inheritance and gifts. In high-inequality societies with low inheritance taxation, parental wealth becomes the primary determinant of a child's starting position in life. Piketty argues that in the 21st century, inherited wealth is becoming as dominant as in the 19th century.
Social mobility — The extent to which individuals can move up or down the economic hierarchy relative to their parents. Intergenerational social mobility is typically measured by the correlation between parents' and children's incomes. Higher correlation = lower mobility. The US has relatively low social mobility compared to most European countries.
Great Gatsby Curve — The empirical relationship observed by economist Miles Corak: countries with higher income inequality tend to have lower intergenerational social mobility. Named by economist Alan Krueger after F. Scott Fitzgerald's novel about rigid class divisions in an unequal America.
Financialization — The increasing dominance of financial activities, financial motives, financial institutions, and financial elites in the economy. Since the 1980s, the financial sector's share of corporate profits has grown substantially, as has the share of income going to financial capital relative to wages.
The Mechanisms of Wealth Concentration
Mechanism 1: r > g — Capital's Structural Advantage
Piketty's central observation: over long historical periods, the return on capital (r — including rent, dividends, interest, profits) has typically been 4-5% per year, while economic growth rates (g) have typically been 1-2% per year. When r > g, capital grows faster than the economy.
The implication: if you have $10 million invested, you earn $400,000-$500,000 per year in returns — a comfortable income from capital alone. You can consume $200,000, reinvest $200,000-$300,000, and your wealth grows faster than the economy. Over generations, this compounds. If everyone starts equal but some can save and invest while others must consume their entire income to survive, the first group's wealth grows indefinitely relative to the second.
Piketty's historical data (assembled in the World Inequality Database, covering 100+ countries over 200+ years) shows this pattern: wealth concentration was very high in the 19th century (r >> g), collapsed through the first half of the 20th century due to wartime capital destruction and progressive taxation, reached a mid-century nadir, and has been rising again since the 1980s.
Criticisms: Lawrence Summers and others have argued that high r cannot be maintained as capital accumulates (returns should fall as capital becomes more abundant). Others note that technology could shift the production function, raising the return to capital indefinitely. The debate remains active.
Mechanism 2: Skill-Biased Technological Change
The wage distribution has widened dramatically since the 1970s. The college wage premium — the difference between wages for college-educated and non-college workers — has grown substantially. Within educational groups, the wage distribution has also widened.
The automation explanation: Technological change has differentially affected the labor market. Routine tasks — those that can be specified as step-by-step procedures — have been automated or offshored. These include middle-skill jobs: manufacturing production, clerical work, routine data processing. Meanwhile, high-skill non-routine cognitive work (problem-solving, creativity, complex analysis) and low-skill non-routine manual work (personal services, care work) have been less affected.
This produces job polarization: growth at the top and bottom of the wage distribution, hollowing out of the middle. The workers who lose middle-skill jobs either move up (with education and retraining) or move down (into lower-wage service work), increasing both inequality and social anxiety about economic security.
The winner-take-all dynamic: Technology changes the scale at which talent can be deployed. A software engineer's code runs on millions of devices; a musician's recording reaches millions of listeners. The best performers in many fields earn exponentially more than the merely good performers — not because they are exponentially better, but because technology amplifies their relative advantage across an enormous audience.
Mechanism 3: Power, Institutions, and Declining Labor Share
The capital-labor split has shifted significantly since the 1970s. In most OECD countries, labor's share of national income (wages and salaries as a proportion of total income) has declined. Capital's share has correspondingly risen.
This shift is not only technological — it is also institutional. Several factors have reduced labor's bargaining power:
Union decline: Union membership in the US fell from approximately 35% of the workforce in the mid-1950s to under 10% today. Collective bargaining was a key mechanism for translating productivity growth into wage growth; its decline has weakened workers' ability to capture their share of productivity.
Monopsony in labor markets: Many labor markets have become more concentrated on the employer side — workers have fewer employers to choose from, reducing their bargaining power. Research by Jose Azar, Ioana Marinescu, and colleagues has documented substantial monopsony power in US labor markets.
Globalization: The integration of low-wage labor markets (China, India, Eastern Europe) into global supply chains created wage competition for manufacturing and some service workers in high-wage countries, reducing workers' bargaining power.
Corporate governance shift: The adoption of "shareholder value maximization" as the dominant corporate governance philosophy from the 1980s onward — associated with Milton Friedman and later Jensen and Meckling — prioritized returns to shareholders over other stakeholders including workers.
Mechanism 4: Inheritance and Dynastic Wealth
Inherited wealth is a direct mechanism of inequality reproduction. In a society with no taxes on inheritance or gifts, accumulated wealth passes fully from generation to generation. If high-wealth families have somewhat higher returns than low-wealth families (partly due to access to better investment opportunities), the inequality compounds over generations.
In the US, approximately $84 trillion is expected to transfer between generations in the next 25 years — described as the "Great Wealth Transfer." With the estate tax applying only to estates above $13 million (2024) and significant avoidance opportunities, much of this will transfer with minimal taxation.
The practical effect: in highly unequal, low-mobility societies, your parents' wealth increasingly determines your opportunities — educational, professional, and social — compressing the meritocratic ideal of earned success.
Historical Patterns: The Kuznets Curve and the Great Compression
The Kuznets Curve (1955)
Simon Kuznets, in a 1955 paper, proposed that inequality follows an inverted-U pattern with development: rising during industrialization (as labor shifts from low-productivity agriculture to higher-productivity industry, with unequal gains) and then declining as countries grow richer and develop redistributive institutions.
For a time, the data seemed to support this: inequality in developed countries did fall through much of the 20th century. But the rising inequality since the 1980s in the most developed countries has largely refuted the Kuznets curve as a deterministic relationship — inequality trends depend on policies and institutions, not just income levels.
The Great Compression (1940-1980)
The period 1940-1980 saw dramatic decline in inequality in the United States — the "Great Compression" (Goldin and Margo, 1992). The top 1% income share fell from approximately 20% in 1928 to about 9% by 1970. Several factors contributed:
- High progressive income taxes: Top marginal income tax rates exceeded 90% in the 1950s-1960s
- Strong labor unions: Unionization rates peaked at 35%, establishing wage floors across industries
- Compressed wage structure in corporations: Social norms limited executive pay relative to average worker pay
- Wartime capital destruction: World War II destroyed accumulated European capital, reducing capital returns
- Strong economic growth: Rapid postwar growth meant the growing pie offset inequality dynamics
The compression ended in the 1970s-1980s with declining union power, reduced top tax rates (Reagan's 1981 tax cuts reduced the top marginal rate from 70% to 50%, then to 28% in 1986), and the policy shift toward deregulation and shareholder primacy.
| Period | US Top 1% Income Share | Top Marginal Tax Rate | Union Membership |
|---|---|---|---|
| 1929 | ~23% | ~24% | ~10% |
| 1950 | ~12% | 91% | 31% |
| 1970 | ~9% | 71% | 24% |
| 1980 | ~10% | 70% (>50% in 1986) | 20% |
| 2000 | ~18% | 39.6% | 13% |
| 2020 | ~20% | 37% | 10% |
Does Inequality Matter?
The Economic Case Against High Inequality
The standard economic argument once held that inequality was beneficial for growth: it incentivizes effort, risk-taking, and investment. Some inequality does serve these functions. But very high inequality appears to reduce growth through several mechanisms:
Human capital underinvestment: In highly unequal societies, children from low-income families receive inferior education and healthcare, wasting human potential. The US's educational opportunity gap — the difference in school quality and educational attainment between high- and low-income children — is larger than in most peer countries.
Reduced aggregate demand: When income concentrates at the top, a larger share goes to households with high savings rates and low marginal propensity to consume. This reduces consumer spending relative to a more equal distribution of the same total income, potentially limiting demand-driven growth.
Political capture: Concentrated wealth produces concentrated political influence. When wealthy individuals and corporations dominate campaign finance and lobbying, they can shift policies to protect their positions — reducing competition, weakening regulation, and cutting taxes — further entrenching inequality.
Social trust and cohesion: High inequality is associated with reduced social trust, increased crime, worse health outcomes (the Wilkinson-Pickett thesis in The Spirit Level, 2009), and weaker civic institutions.
What Works: Policy Levers
Historical and cross-national evidence identifies policies that reduce inequality without undermining economic dynamism:
Progressive taxation: Higher marginal tax rates on top incomes reduce inequality directly and fund redistributive spending. The evidence that high top marginal rates substantially reduce growth is weak; Scandinavian countries combine very high taxes with strong economic performance.
Wealth and inheritance taxes: Taxes on accumulated wealth (Piketty's proposal: a global wealth tax) and on large inheritances directly address the r > g dynamic that drives wealth concentration.
Early childhood investment: Universal high-quality early childhood education and healthcare is among the most cost-effective investments in reducing inequality across generations. James Heckman's research shows very high returns to early childhood programs for disadvantaged children.
Labor market institutions: Minimum wages, union rights, and sectoral bargaining increase workers' share of income.
Universal healthcare: Medical bankruptcy is a major driver of middle-class wealth destruction in the US, not shared by peer countries with universal systems.
For related concepts, see how financial markets work, how inflation works, and how recessions happen.
Global Inequality: The World Picture
Wealth Concentration at the Global Scale
The dynamics of wealth concentration are not limited to any single country. The World Inequality Database (wid.world), maintained by Piketty and colleagues, tracks distributional data across more than 100 countries and reveals that the patterns are strikingly consistent across very different institutional contexts.
In 2022, the richest 10% of the global population held approximately 76% of total global wealth. The bottom 50% — roughly 4 billion people — held approximately 2%. This is not merely inequality between rich and poor countries; it is extreme stratification within countries at every income level, including within developing nations where a small elite captures a disproportionate share of national income.
Billionaire wealth growth has been particularly dramatic. According to Oxfam's annual wealth reports:
- Between 2020 and 2022, the world's 10 richest men doubled their fortunes during the COVID-19 pandemic, while incomes fell for 99% of humanity
- In 2023, it was estimated that just 5 individuals were richer than the bottom 60% of the global population combined
- The period 2020–2022 saw the largest two-year increase in billionaire wealth since reliable records began
"The pandemic was a catastrophe for billions of people — but an astonishing opportunity for the wealthy. Crises tend to accelerate whatever wealth concentration processes were already underway." — Oxfam, Survival of the Richest (2023)
The Nordic Exception
The most powerful argument that inequality is not inevitable is the existence of countries that have combined market economies with substantially lower inequality. Denmark, Finland, Norway, and Sweden all have Gini coefficients for income in the range of 0.27–0.30, compared to 0.39 for the United States and 0.35 for the United Kingdom.
These countries achieve this through:
- Top marginal income tax rates of 55–65%
- Comprehensive universal healthcare eliminating medical bankruptcies
- Heavily subsidized or free university education
- Generous unemployment insurance and active labor market policies
- Strong labor unions with broad collective bargaining coverage (60–70% of workers covered)
Importantly, Nordic economies have performed strongly by standard economic metrics — they do not trade off equality for growth. Denmark and Norway have per-capita GDP levels comparable to or exceeding the United States.
| Country | Gini (Income) | Top 1% Income Share | Social Mobility Rank | GDP per Capita (2023) |
|---|---|---|---|---|
| Denmark | 0.28 | ~8% | 1st (highest) | ~$68,000 |
| Finland | 0.27 | ~9% | 2nd | ~$55,000 |
| Norway | 0.26 | ~10% | 3rd | ~$89,000 |
| Sweden | 0.29 | ~9% | 4th | ~$59,000 |
| Germany | 0.31 | ~13% | 12th | ~$52,000 |
| United Kingdom | 0.35 | ~14% | 21st | ~$46,000 |
| United States | 0.39 | ~19% | 27th | ~$80,000 |
| Brazil | 0.53 | ~28% | Near bottom | ~$10,000 |
The Geography of Opportunity
Raj Chetty and the Opportunity Atlas
Some of the most granular research on inequality's consequences comes from economist Raj Chetty at Harvard's Opportunity Insights lab. His team linked IRS tax records with Census data to track the economic outcomes of millions of Americans born between 1978 and 1983, producing what amounts to a real-time map of intergenerational mobility in the United States.
Their findings were striking. A child born in the bottom income quintile in San Jose, California, had roughly a 13% chance of reaching the top quintile as an adult. A similar child born in Charlotte, North Carolina, had only a 4% chance. Your zip code at birth is one of the most powerful predictors of your economic outcome — more powerful than individual characteristics for many groups.
Chetty and colleagues identified key local factors associated with higher intergenerational mobility:
- Lower residential segregation (racial and economic)
- Lower income inequality in the area
- Better-quality schools (measured by test scores adjusted for demographics)
- Greater social capital (civic engagement, community organizations)
- Greater share of two-parent families
This work makes the abstract argument about inequality concrete: high inequality does not merely mean that some people have more than others — it means that the circumstances of birth increasingly determine life outcomes, breaking the meritocratic ideal.
The Great Gatsby Curve in Practice
The Great Gatsby Curve, named by economist Alan Krueger and first described by Miles Corak, represents the empirical relationship between income inequality (measured by Gini coefficient) and intergenerational income persistence (measured by the intergenerational earnings elasticity — the correlation between parents' and children's incomes).
Countries with higher inequality show much higher earnings persistence across generations:
- In Denmark: a father's income explains about 15% of a son's income
- In Norway: about 17%
- In Canada: about 19%
- In Germany: about 32%
- In the United Kingdom: about 50%
- In the United States: about 47%
In practical terms: in Scandinavia, where you start has relatively little effect on where you end up. In the United States and UK, it has enormous effect. The irony is particularly sharp for the United States, a country whose self-image centers on meritocratic upward mobility — the "American Dream" — but which in practice has lower intergenerational mobility than most of Western Europe.
Inequality and Political Economy
How Wealth Concentration Distorts Democracy
One of the most consequential effects of extreme wealth concentration is political rather than economic. As wealth concentrates, its owners gain disproportionate political influence through campaign finance, lobbying, media ownership, and the revolving door between industry and regulatory agencies.
Martin Gilens at Princeton and Benjamin Page at Northwestern conducted a landmark 2014 study analyzing 1,779 policy issues and comparing the actual policy outcomes with the preferences of economic elites, organized business interests, mass-based interest groups, and average citizens. Their conclusion was stark: economic elites and business interest groups have substantial independent influence on government policy, while average citizens and mass-based interest groups have little or no independent influence.
When the preferences of economic elites diverged from the preferences of ordinary citizens, elite preferences predicted outcomes; citizen preferences did not. The political system, in other words, was responsive to wealth, not to numbers of people. This dynamic — concentrated wealth producing concentrated political power producing policies that protect concentrated wealth — is a self-reinforcing cycle.
"The central argument here is straightforward: when the preferences of economic elites and the stands of organized interest groups are controlled for, the preferences of the average American appear to have only a minuscule, near-zero, statistically non-significant impact upon public policy." — Gilens and Page (2014), Perspectives on Politics
Regulatory Capture and Anti-Competitive Dynamics
A related mechanism is regulatory capture — the tendency of regulatory agencies to be dominated by the industries they regulate, serving industry interests rather than the public. In highly concentrated sectors — finance, pharmaceuticals, telecommunications, agriculture — regulatory frameworks often entrench incumbent advantages, raising barriers to entry and protecting profit margins.
Market concentration itself has increased substantially since the 1990s. Economists Jan De Loecker and Jan Eeckhout have documented rising markups — the ratio of prices to marginal costs — across most US industries from 1980 to 2019, suggesting declining competition. Higher markups mean higher profits flowing to capital owners and higher prices paid by consumers — a double redistribution upward.
Technology, Automation, and the Future of Inequality
The Automation Dividend and Who Captures It
Artificial intelligence and automation present the most significant near-term structural challenge to labor income distribution. MIT economists Daron Acemoglu and Pascual Restrepo have argued that automation displaces workers from tasks they were performing, reducing demand for their labor — and the "reinstatement effect" (new tasks created) may not compensate at the pace assumed in optimistic economic models.
Their 2019 research found that each industrial robot introduced in the US labor market between 1990 and 2007 reduced employment by 3–6 workers and reduced local wages by 0.2–0.5%. The affected workers were disproportionately those without college degrees in manufacturing regions.
The gains from automation — higher productivity, lower consumer prices, higher profits — have accrued primarily to:
- Capital owners (shareholders of companies that automate)
- High-skill workers who complement the technology (engineers, managers)
- Consumers (through lower prices)
What is generally NOT happening automatically is a redistribution to displaced workers. In the absence of policy intervention — wage insurance, job retraining programs, stronger social insurance — automation proceeds as a transfer from labor to capital.
Platform Economics and Winner-Take-All Concentration
The digital economy has created entirely new mechanisms of wealth concentration. Platform businesses — search engines, social media, e-commerce marketplaces, app stores — benefit from network effects (the platform becomes more valuable as more people use it) and very low marginal costs (serving one more user costs almost nothing).
These dynamics tend toward monopoly or duopoly rather than competition. Google handles approximately 90% of global search queries. Meta's family of apps (Facebook, Instagram, WhatsApp) reaches approximately 3.2 billion people monthly. Amazon handles over 40% of US e-commerce.
The profits generated by these platforms are extraordinary and accrue to a small number of shareholders and highly paid technology workers. Jeff Bezos, Mark Zuckerberg, and Larry Page and Sergey Brin entered the Forbes 400 list through ownership of platform businesses whose scale was unprecedented in economic history. The winner-take-all dynamics of digital markets mean that second place captures very little; being 10% better than a competitor can capture 100% of a market.
What the Research Says: Does Inequality Harm Economic Growth?
The IMF's Findings
The International Monetary Fund, not historically an institution sympathetic to redistribution, has produced some of the clearest evidence that high inequality harms sustainable economic growth. In their 2014 Staff Discussion Note, Ostry, Berg, and Tsangarides analyzed cross-country data and found:
- Higher inequality is associated with shorter periods of economic expansion (growth "spells" ending sooner in more unequal countries)
- Redistribution itself, in most cases, does not harm growth — and in some cases helps it
- The growth-harmful effects of inequality are larger and more consistent than previously believed
The mechanisms: high inequality reduces investment in human capital (the children of poor families get worse education and healthcare), leads to underinvestment in public goods, generates political instability, and can suppress consumption-driven growth.
The Inequality-Democracy Feedback Loop
Particularly concerning is the relationship between economic inequality and democratic erosion. Political scientists have documented that countries with very high income inequality are more susceptible to democratic backsliding — the captured political institutions of a highly unequal society make it harder for citizens to organize effectively against the concentrated power of wealthy elites.
The United States' experience from roughly 2000-2025 illustrates this dynamic: rising inequality coinciding with a perception that the political system is unresponsive to ordinary citizens' concerns, generating the conditions for populist politics that may further weaken the institutional constraints that once moderated inequality.
References
- Piketty, T. (2014). Capital in the Twenty-First Century. Harvard University Press.
- Atkinson, A. B., Piketty, T., & Saez, E. (2011). Top Incomes in the Long Run of History. Journal of Economic Literature, 49(1), 3–71. https://doi.org/10.1257/jel.49.1.3
- Acemoglu, D., & Restrepo, P. (2018). The Race Between Man and Machine. American Economic Review, 108(6), 1488–1542. https://doi.org/10.1257/aer.20160696
- Goldin, C., & Katz, L. F. (2008). The Race Between Education and Technology. Harvard University Press.
- Chetty, R., et al. (2014). Where Is the Land of Opportunity? The Geography of Intergenerational Mobility in the United States. Quarterly Journal of Economics, 129(4), 1553–1623. https://doi.org/10.1093/qje/qju022
- Corak, M. (2013). Income Inequality, Equality of Opportunity, and Intergenerational Mobility. Journal of Economic Perspectives, 27(3), 79–102. https://doi.org/10.1257/jep.27.3.79
- Ostry, J. D., Berg, A., & Tsangarides, C. G. (2014). Redistribution, Inequality, and Growth. IMF Staff Discussion Note SDN/14/02.
- Wilkinson, R., & Pickett, K. (2009). The Spirit Level: Why More Equal Societies Almost Always Do Better. Allen Lane.
Frequently Asked Questions
What is Piketty's r > g thesis?
Thomas Piketty's 2014 book Capital in the Twenty-First Century argued that when the return on capital (r) exceeds economic growth rate (g), wealth concentration inevitably increases over time. Capital owners' wealth grows faster than the economy, so their share of total income and wealth rises. This was the central pattern of the 19th century and, Piketty argues, is returning after a mid-20th-century interruption.
How much has inequality grown?
In the US, the top 1% share of pre-tax income rose from about 9% in 1970 to about 20% in 2020. The top 0.1% wealth share rose from 7% in the 1970s to about 19% in 2020. Global wealth inequality is even more extreme: the world's top 10% owns approximately 76% of total wealth. These patterns are broadly consistent across developed economies.
Does high inequality harm economic growth?
The evidence suggests moderate-to-high inequality harms long-run economic growth. IMF research (Ostry et al., 2014) found that high inequality reduces the duration of growth spells. Mechanisms: inequality reduces investment in human capital (poorer children get worse education), weakens consumer demand, increases social instability, and corrupts political institutions. Low inequality is not harmful to growth.
Is inequality inevitable in a market economy?
Some inequality is inherent in market economies that reward differential skills, effort, and risk-taking. But the level and type of inequality are heavily shaped by institutions: tax systems, education quality and access, labor regulations, social insurance, inheritance rules, and anti-monopoly enforcement. Countries with similar economic structures have dramatically different inequality levels (Nordic countries vs US).
What role does technology play in rising inequality?
Skill-biased technological change increases demand for high-skill workers relative to low-skill workers, widening wage inequality. Automation displaces routine manual and cognitive jobs. Winner-take-all dynamics in technology markets concentrate profits among a small number of platform monopolies. These forces are structural drivers of 21st-century inequality that policy must address.
Does inequality affect social mobility?
Yes — the 'Great Gatsby Curve' (economist Miles Corak) shows that countries with higher inequality tend to have lower intergenerational social mobility. The US has relatively high inequality and low social mobility compared to European countries. In a highly unequal society, where you start matters enormously for where you end up.
What policies most effectively reduce inequality?
Evidence-based policies that reduce inequality: progressive income and wealth taxes, universal high-quality public education (particularly early childhood), universal healthcare reducing medical bankruptcy, labor market institutions (minimum wages, unionization), estate taxes limiting intergenerational wealth transfer, and earned income tax credits.
