Global inequality and national inequality: Is there a trade-off?

Abstract

The objective of this paper is to show that there is a trade-off between global inequality (between countries) and national inequality (within countries). We observed that when the former declines, the latter increases. Empirically, it is possible to observe a shift from higher global inequality to lower global inequality levels (and higher national inequality levels) since the last quarter of the previous century. From a historical perspective, my thesis is that when the main drivers of economic growth are technology and means of transportation, inequality is mostly between countries (higher global inequality). In contrast, when the main driver of economic growth is labour (and related factors such as human capital, skills, knowledge exploitation), then inequality is mostly within countries (higher national inequality). Limitations of data availability did not allow for testing these historical trends. However, the trends of global and national inequalities over the last three to four decades confirm such a thesis.