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Economy

Researchers are calling for better data on inequality

For us to be able to reduce inequality in and between the countries of the world, we need better data on inequality. There is no international system for measuring inequality’, is the message from Professor Paul Sharp and more than 50 other economists.

By Marlene Jørgensen, , 2/27/2020

What is the situation with inequality?

There are a lot of indications that inequality is increasing over recent years. In a country like China, inequality is growing very rapidly, and this is the pattern we usually see when countries develop before inequality declines again when the development reaches a certain point.

But it also seems that inequality has started increasing in Western countries such as Denmark and the U.S., where it was otherwise declining. The real problem though is that we have no standardised method of measuring inequality in and across countries in order to document it.

 

What are the challenges of keeping figures on inequality?

Most figures are based on gross domestic product per resident. When comparing Denmark and the U.S., the U.S. is on average richer than Denmark, but the figures do not show that there is more equality in Denmark than in the U.S., where many people are either incredibly rich or poor. Therefore, it is important to look at more than just income.

This applies to wealth inequality, for example. The amount of wealth people have is not taken into account, but wealth inequality can also cause problems in Western countries. In particular, the housing market and increasing housing prices mean that homeowners are better off than everyone else.

 

What are the consequences of this?

With no common method of measuring inequality, it becomes difficult to compare inequality between countries. In Denmark, we have registry data and know what people earn, but in countries without registry data, it immediately becomes more difficult, partly because data collected through surveys etc. is not valid in the same way.

Inequality is of enormous concern, and one of the UN Global Goals is to reduce inequality. But how can we find solutions and have a qualified debate about reducing inequality if we do not know the state of things? The consequence is that political decisions are made on the wrong basis.

 

What does it take to get qualified data?

The UN or other international institutions should take the initiative to create a standardised, international system for measuring inequality that all countries must follow – just like with GDP today.

Ideally, the UN would be at the forefront of this, but one challenge with such a large organisation is it can get mixed up in politics. Going back to China, the country is an important player in the UN and is not necessarily interested in reporting how much inequality is in the country. An obvious place to start is at the EU level – such as under the auspices of the EU’s statistics organisation Eurostat – which should be able to make it possible.

It is also crucial to have data going back many years. If you look at the data for the past ten years, it may alternately go up and down, but this does not say much about the development. For that, you have to look at the development over 50-100 years to assess how things are today.

 

Meet the researcher

Paul Sharp is a professor and economic historian in the Department of Business and Economics. He deals with inequality and hopes that his research can explain how inequality has developed in Denmark over time – but he needs better data in the field.

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Did you know that

The concept of statistics is associated with how states make policy? The New Latin term ‘statisticus’ covers ‘that which concerns state matters’.

Source: Den Danske Ordbog/The Danish Dictionary.