Effects of economic inequality
They are unable to secure adequate nutrition for their families, cannot pay utility bills to keep themselves warm during the winter or cold during heat waves, and lack sufficient housing.
[19] Conversely, some researchers have criticised the view that economic inequality causes worse health outcomes, with some studies failing to confirm the relationship or finding that the relationship was more complicated due to issues of determining causality, inadequate data, correlation versus causation or confounding variables (for example, more unequal countries tend to be economically poorer).
Children from disadvantaged backgrounds face multiple barriers that hinder their educational progress, including gender disparities, language challenges, and the impacts of crises and conflicts.
For instance, girls in many countries have lower school attendance rates than boys, influenced by factors such as safety concerns, early marriage practices, and household responsibilities.
[25] The Harvard Gazette highlights the "almost ironclad link between a child's ZIP code and her chances of success," illustrating how geographic location can mirror achievement levels and perpetuate inequality.
UNESCO advocates for education policies that are inclusive and equitable, emphasizing the need for fair funding, special assistance for low-performing schools, and school-community partnerships.
[25] Pro-poor policies, such as cash transfers to encourage attendance and investments in public education that benefit the most disadvantaged, are critical for reducing inequality.
His explanation for this relationship is that Community and equality are mutually reinforcing... Social capital and economic inequality moved in tandem through most of the twentieth century.
In terms of the distribution of wealth and income, America in the 1950s and 1960s was more egalitarian than it had been in more than a century... [T]hose same decades were also the high point of social connectedness and civic engagement.
[31]Albrekt Larsen has advanced this explanation by a comparative study of how trust increased in Denmark and Sweden in the latter part of the 20th century while it decreased in the US and UK.
Some studies[2][3] have found evidence for this theory, noting that in societies where inequality is lower, population-wide satisfaction and happiness tend to be higher.
[48] Jared Bernstein and Elise Gould of the Economic Policy Institute suggest that poverty in the United States could have been significantly mitigated if inequality had not increased over the last few decades.
[51] A number of researchers (David Rodda,[52] Jacob Vigdor,[53] and Janna Matlack), argue that a shortage of affordable housing – at least in the US – is caused in part by income inequality.
From whence, then, arises that emulation which runs through all the different ranks of men, and what are the advantages which we propose by that great purpose of human life which we call bettering our condition?
[69]Modern sociologists and economists such as Juliet Schor and Robert H. Frank have studied the extent to which economic activity is fueled by the ability of consumption to represent social status.
In particular, Galor and Zeira argue that since credit markets are imperfect, inequality has an enduring impact on human capital formation, the level of income per capita, and the growth process.
In the initial phases of industrialization, when physical capital accumulation was the dominating source of economic growth, inequality boosted the development process by directing resources toward individuals with higher propensity to save.
The reduced form empirical relationship between inequality and growth was studies by Alberto Alesina and Dani Rodrik,[79] and Torsten Persson and Guido Tabellini.
A 1999 review in the Journal of Economic Literature states high inequality lowers growth, perhaps because it increases social and political instability.
The evidence has not been accepted by all: some writers point out the concentration of richer countries at the lower end of the inequality spectrum, the poor quality of the distribution data, and the lack of robustness to fixed effects specifications.
[83]NYU economist William Baumol found that substantial inequality does not stimulate growth because poverty reduces labor force productivity.
[90] Studies of larger data sets have found no correlations for any fixed lead time,[91] and a negative impact on the duration of growth.
[93] According to IMF staff economists, "if the income share of the top 20 percent (the rich) increases, then GDP growth actually declines over the medium term, suggesting that the benefits do not trickle down.
[97] However, Kristin Forbes found that if country-specific effects were eliminated by using panel estimation, then income inequality does have a significant positive relationship with economic growth.
[91] IMF economists found a strong association between lower levels of inequality in developing countries and sustained periods of economic growth.
Accordingly, improving income distribution is expected to foster long-run economic growth, especially in low-income countries where the levels of inequality are usually very high.
The challenge for policy makers is to control structural inequality, which reduces the country's capacities for economic development, while at the same time keeping in place those positive incentives that are also necessary for growth.
[107] Princeton economist Roland Benabou's finds that the growth process of Korea and the Philippines "are broadly consistent with the credit-constrained human-capital accumulation hypothesis.
"[108] In addition, Andrew Berg and Jonathan Ostry suggest that inequality seems to affect growth through human capital accumulation and fertility channels.
On the other hand, other sources argue that alleviating poverty will reap positive progressions on the environment, especially with technological advances in energy efficiency.
