Distribution of wealth

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Differences in national income equality around the world as measured by the national Gini coefficient. The Gini coefficient is a number between 0 and 1, where 0 corresponds with perfect equality (where everyone has the same income) and 1 corresponds with perfect inequality (where one person has all the income, and everyone else has zero income). Countries in red tones have societies with more income inequality than those in green tones.
Differences in national income equality around the world as measured by the national Gini coefficient. The Gini coefficient is a number between 0 and 1, where 0 corresponds with perfect equality (where everyone has the same income) and 1 corresponds with perfect inequality (where one person has all the income, and everyone else has zero income). Countries in red tones have societies with more income inequality than those in green tones.

Distribution of wealth is a comparison of the wealth of various members or groups in a society, and is one aspect of the economy and social structure. Typically, various racial and ethnic groups possess differing amounts of wealth, and the same is true when people are grouped by age or education. Different jobs bring in greatly different wages; the pay for some jobs is thousands of times greater than the pay for other jobs.

The phrase "distribution of wealth" should not be confused with the phrase "redistribution of wealth". The statistical study of the distribution of wealth is designed to provide data, not recommend policy.

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There are any number of ways in which the distribution of wealth can be analysed. One example is to compare the wealth of the richest ten percent with the wealth of the poorest ten percent. In many societies, the richest ten percent control more than half of the total wealth. Mathematically, a Pareto distribution has often been used to quantify the distribution of wealth, since it models an unequal distribution. More sophisticated models have also been proposed. [1].

In some countries, attempts are made through taxation or regulation to redistribute capital and diminish extreme inequalities of wealth. Examples of this practice go back at least to the Roman republic in the third century B.C.,[2] when laws were passed limiting the amount of wealth or land that could be owned by any one family. Motivations for such limitations on wealth include the desire for equality of opportunity, a fear that great wealth leads to political corruption, to gain the political favor of a voting bloc, or fear that extreme concentration of wealth results in a limited consumer base.

The political systems of socialism and communism are intended to diminish the perceived conflicts arising from the unequal distribution of wealth. The idea is that a government, serving the interests of the proletariat, would confiscate the wealth of the rich and then distribute benefits to the poor. Critics of state-managed economies, notably Milton Friedman, point out that the slogan "From each according to his ability, to each according to his need." turns ability into a liability and need into an asset. They cite the former Soviet Union and The People's Republic of China as examples of countries where, despite aggressive economic regulation, wealth continues to be distributed unevenly.

Proponents of capitalism or Objectivist philosophy reject most redistributions in favor of wealth creation and abolishment of trade barriers. Wealth can be created through several means, such as harvesting and selling natural resources, improving production methods to allow faster creation of wealth, or applying skill and labor to increase the value of materials.

The creation of wealth affects economic growth that can boost demand and trade, create jobs and increase wages. However, since wealth often trickles down unevenly, the standard of living may improve while simultaneously increasing wealth inequality. Thus wealth distribution must be considered alongside such factors as job opportunities, the costs of goods and services, and the base standard of living.

In addition to government efforts to redistribute wealth, the tradition of individual charity (such as tithing) is a voluntary means of wealth transference. There are also many voluntary charitable organizations making concerted efforts to aid those in need.

At the end of the twentieth century, wealth is concentrated among the G8 and Western industrialized nations, along with several Asian nations.

A study found that the richest 2% own more than half of global household assets.[3]

Despite this, the distribution has been changing quite rapidly in the direction of greater concentration of wealth.[4]

The United States is the richest country, and in 2000, the mean wealth was $144,000 per person.[3] In the United States at the end of 2001, 10% of the population owned 71% of the wealth, and the top 1% controlled 38%. On the other hand, the bottom 40% owned less than 1% of the nation's wealth.

In 2003, the wealthiest 1% of the population in the United States, which has a system of progressive taxation, paid over 34% of the nation's federal income tax; the wealthiest 10% bore 66% of the total tax load; the top 25% of income earners paid 84% of the income taxes; and the upper half accounted for virtually the entire U.S. income tax revenue (nearly 97%).

  1. ^ "Why it is hard to share the wealth"
  2. ^ Livy, Rome and Italy: Books VI-X of the History of Rome from its Foundation, Penguin Classics, ISBN 0-14-044388-6
  3. ^ a b The rich really do own the world 05 December 2006
  4. ^ "Wealth Inequality Charts"

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