Equity Within and Between Nations

Introduction Income inequality between persons in the world as a whole can be conceptualized as composed of two elements. First there is inequality within nations or countries. Second, there is inequality between nations or countries, being defined as inequality between the average incomes of these different nations. Some inequality measures, such as the variance of log‐income, or the generalized entropy family of inequality measures, can be formally decomposed into these two components such that they add up to total inequality. In a purely accounting sense, therefore, inequality within nations and inequality between nations both contribute to global inequality and are thus appropriate policy targets. Even when such a precise formal accounting decomposition cannot be accomplished for income, or even when the discourse on inequality transcends income and touches on broader dimensions such as health and education, the notion of equity between and within nations serves well as a framework for underlying concerns and for organizing discussion and debate. Inequality within nations is ordinarily thought to be within the purview of the policymakers and the social and political processes of that country. In a globalizing world, however, it cannot be insulated from global forces and trends, and from policies adopted by other countries or the international community at large. Sometimes, it cannot even be insulated from the social and political processes in other countries, especially neighboring countries. Leaving aside these global influences, whose effects are much discussed, there is of course considerable debate about equity and inequity within a country, its impact on growth and on the fabric of society, and on what policies can best be deployed to reduce inequity if that is an ethical goal, or to manage its consequences for growth and development even if equity per se is not an ethical concern. For example, among the fundamental issues to be addressed is the conceptual, empirical and policy difference between reducing inequality of ex post outcomes and inequality of ex ante opportunity. Difficult as the questions of equity within nations tend to be, inequality between nations is an altogether more difficult topic. The difficulties are partly philosophical, arising from a long standing debate on