ECONOMY

628 inequality
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50
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0 .2 .4
Ethnic fractionalization
.6 v
GINI index
Fitted values
Fig. 34.2 Fractionalization and inequality
But if the inequality of skills underlies the inequality of income, then the primary
puzzle becomes understanding why skill inequalities are so different across countries.
Skill levels today are themselves the result of both government policies and longstanding
cultural forces, like religion or ethnicity, but patterns of national inequality
appear to pre-date the era of large-scale government schooling (the nineteenth
century). As high levels of inequality often pre-date significant government redistribution
or schooling, cultural and religious causes are probably the first causes of
inequality across countries.
Protestant churches sought legitimacy in the Bible (as opposed to the traditions of
the Catholic Church), and these churches encouraged literacy to increase familiarity
with the Bible (Weber 2001). Protestant communities worked to create widespread
education that would ensure that everyone could read, which both increased the level
of education and decreased its variance by raising the lower tail of the distribution.
More importantly, skill inequality seems to come mostly from the juxtaposition
of ethnicities with different educational traditions, and in particular the extent to
which New World countries are made up primarily of Europeans or of mixtures of
Europeans and non-Europeans. As Figure 34.2 shows, the correlation between ethnic
fractionalization and income inequality is quite strong. Europeans who came to the
New World had a significant educational advantage over the natives they conquered,
at least in terms of skills that became valuable in developed economies. Even the great
empires of the pre-Columbian Americas lacked basic modern skills; the Incas had no
alphabet.