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At the beginning of classes every autumn, I tease my students with the following question: Is it better to be poor in a rich country or rich in a poor country?"Rich" and "poor" are those in the top and bottom 5 percent of the income distribution, respectively.The larger point of this comparison is to underscore the importance of income differences across countries, relative to inequalities within countries.Income gaps between Europe and poorer parts of the world were small.During much of the postwar period, income gaps between rich and poor countries accounted for the greater part of global inequality.For a long time, economists like me have been telling the world that the most effective way to reduce global income disparities would be to accelerate economic growth in low-income countries.Advanced economies' increased trade with low-income countries has contributed to domestic wage inequality. And probably the single best way to raise incomes in the rest of the world would be to allow a massive influx of workers from poor countries into rich countries' labor markets.
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