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Causes of income inequality

Satisfactory Essays
1. Introduction
In the last few decades, many countries have achieved high rate of economic growth in their development process, which could be explained by the development of industrialization and globalization processes (Jaumotte, Lall & Papageorgiou 2013). However, beside the economic achievement, it is witnessed that the issue of income inequality has persisted, or even increased (IMF 2014). If looking through the World Bank’s statistical table of GINI coefficient index, one of the indicators used in measuring income inequality, income inequality can be seen not only in developing countries, but also in developed countries in recent decades (IMF 2014; World Bank 2014). The increase of income inequality in recent decades is contradicted with the prediction of Kuznets (1955) that income inequality would be declined if the countries have reached the high level of economic performance and industrialization.
Under the economic view, income inequality is understood as the situation in which income is distributed differently across population (IMF 2014). The differences in income distribution can effect directly to both economic growth and poverty reduction strategies of the countries (Jihène & Ghazi 2013). Therefore, causes of income inequality are still the concern of many scholars. There are many reasons that make income inequality become greater such as individual talent, changing in household structure, aging, inequality in accessing social services, corruption (Biewen & Juhasz 2010; Blanchflower & Slaughter 1999; Garvy 1952; Ragayah 2008). However, this essay, with attempt to investigate the reasons of inequality in income distribution across the individuals and groups at the country level, which associated with industrializa...

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...l manufactories could not find enough skilled workers to expand their manufacturing process (Vietnam General Statistics Office 2010) is a relevant example to illustrate Charles-Coll’s (2011) argument. Therefore, investment in education and having appropriate education policy is important for reducing income inequality.
4. Conclusion
In summary, income inequality has increased in recent decades in most countries in the world by many reasons, and these reasons have very complex interconnection with each other. In this paper, only three causes, which related to the globalization and technological changes is taken in to account. Similarly, there are many channels that governments can apply in order to reduce income inequality problem, among those, fiscal policies, including tax policies and social welfare, education are the primary tools for addressing income inquality.
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