Can Inequality Be Reduced by Building Better Markets?

Abstract

The growth in wage inequality within many late-industrial countries is one of the most spectacular and consequential developments of our time, spectacular because the turnaround was so sudden and undermined the conventional view that economic development would bring about widely diffused affluence, consequential because it is affecting the lives of so many people and in such profound ways. During the early stages of this takeoff in inequality, the dramatic changes in remuneration were happening largely under the radar, indeed the public was not just unconcerned by the changes but in fact largely unaware of them.1 But that’s no longer the case. We are now in the midst of a historic moment in which public debates about the legitimacy of extreme poverty and inequality have taken on a new prominence and urgency.