Understanding Economic Inequality
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Understanding Economic Inequality

Bigger Pies and Just Deserts

Todd A. Knoop

In Understanding Economic Inequality, the author brings an economist’s perspective informed by new, groundbreaking research on inequality from philosophy, sociology, psychology, and political science and presents it in a form that it is accessible to those who want to understand our world, our society, our politics, our paychecks, and our neighbors’ paychecks better.
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Chapter 6: Why are the three most important factors in global inequality location, location, and location?

Todd A. Knoop

Abstract

In this chapter we look at inequality from a global perspective and examine differences in income across the world’s population, regardless of country. We want to understand why the global income distribution is as unequal as it is, and also why global inequality and poverty have fallen dramatically over the last 25 years. The vast majority of inequality across people can be explained by one simple fact: which country you live in. “Where” is much more important than who you are or what you do. In other words, the social determinants of productivity are more important than the individual determinants of productivity. The local economic institutions that shape our incentives to engage in productive behavior—things such as corruption, property rights, historical path dependence, open markets, macroeconomic policy, education systems, democracy, and culture—play a bigger role in determining our income than how hard we work or our innate skills.

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