The Increasing Inequality in Income distribution: A Note

In the last 20 years the within countries income inequality has continuously increased. This is a global phenomenon which is observable both advanced and developing countries. Excessive income and wealth inequalities played a role in the genesis of the recent financial crisis and may impair the recovery of the world economy. The long term trend of rising inequalities is the result of different forces. On the one side technological change modified the demand for labour in favour of skilled workers widening the skill premium in wages. From the other side, globalization in trade and finance have contributed to the problem. In particular, fast financial liberalization seems to be a major source of increased inequalities. The huge expansion of financial flows in an international environment lacking adequate international regulatory and supervisory mechanisms means the problems of global economic instability and growing inequality cannot be solved at the national level. New supranational rules and cooperative solutions are called for.