Inequality: Major Trends, Policy Challenges and the Need for Global Economic Compact

This G20-commissioned report was prepared by the Macroeconomic and Development Policies Branch of the Division on Globalization and Development Strategies within UN Trade and Development (UNCTAD) to support the work relating to the first priority of the Framework Working Group (FWG) of the Group of 20 (G20) under the Brazilian Presidency in 2024, namely, 'Putting inequality at the forefront: Responding to macroeconomic and distributional implications of emerging global trends and domestic developments pertinent to international contexts'. FWG discusses contemporary relevant macroeconomic issues and addresses short-term and structural economic issues, and monitors risks and uncertainties that affect scenarios and projections. In this context, this report focuses on ways to leverage wage-led growth at the national level, while also reversing key asymmetries internationally, with the aim to address some of the essential mechanisms propagating inequality at the global and domestic levels. To these ends, section B examines the macroeconomics of inequality from a structural perspective, focusing on the role of the labour income share and sectoral composition, including during the cycle of monetary tightening. Turning to the international dimension, section C.1 tackles the issue of the uneven distribution of global economic activities in general and trade gains by large multinational enterprises, in particular. In the context of the developing countries, it also examines some of the effects and policy lessons of the financialization of commodity sectors (section C.2). Section D concludes by charting steps towards a new international policy compact.