The Economist Got It Wrong on U.S. Income Inequality

In its special report on the rise and fall of the wealthy, referring to the trends in income inequality in the United States The Economist (April 4-10th 2009, p. 3) states “… Another international study found that only Mexico and Russia had more unequal income distributions than America.” That is plain wrong. In Latin America alone all the eighteen countries for which there are comparable data show more inequality than the United States, and that is the case for dozens and dozens more around the world. Undoubtedly, in the last two decades inequality in the U.S. has risen sharply and shamefully. But disposable income (after transfers and taxes) inequality in the U.S. is still far from the levels found in most of the developing world.