Economic harms - Poverty
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How can extreme wealth produce social/economic harms in relation to poverty?
Extreme concentrations of wealth may contribute to economic structures that disproportionately benefit owners of capital and in turn can increase economic vulnerability of poorer households by affecting housing affordability or weakening labour's bargaining position in the economy. When the benefits of economic growth are disproportionately captured by those with already high levels of wealth, the extent to which growth contributes to poverty reduction may be diminished. Weaker and less inclusive economic growth may also constrain fiscal capacity by slowing the expansion of the tax base and reducing the resources available to address poverty. These effects may be reinforced when wealth translates into disproportionate political influence, weakening support for redistributive policies, social protection and investment in public services.Summary
| Certainty of evidence | Strength of relationship |
|---|---|
Moderate:There is strong and consistent evidence that inequality affects poverty reduction and mediates the relationship between growth and poverty. This evidence however uses aggregate measures and focuses on income, not on extreme wealth levels or concentration. There is nevertheless growing evidence linking wealth concentration to slower growth and financial instability, while asset accumulation practices linked to financialization of housing affect housing affordability pressures. Confidence in the fact that extreme wealth and wealth concentration do bear on poverty is also linked to evidence in other reviews in this series, which have identified harms in relation to other relevant aspects - such as growth and political capture. |
Moderate- Strong:Inequality can significantly reduce the poverty-reducing impact of economic growth, with some studies finding that reductions in inequality have a larger effect on poverty than equivalent increases in growth. However, the size of these effects varies across contexts and is often estimated using broader income measures of inequality rather than extreme wealth specifically. Wealth concentration is found to be a key factor in shaping the economy and contributes to financial instability and housing unaffordability, which can increase poverty risks and vulnerability among lower-income households. |
Not possible to identify a specific harm threshold from the current evidence base.
- Economic structure and the relative importance of capital-intensive versus labour-intensive sectors. Relatedly, also labour market institutions, including collective bargaining arrangements and worker bargaining power
- Housing market institutions, including planning systems, tenure patterns and housing supply constraints - including the degree of housing financialisation and the role of institutional investors in property markets
- Financial regulation and credit market institutions that bear on the resilience of the financial system to asset-price bubbles and instability
- Welfare systems and the generosity and coverage of social protection that can buffer economic shocks and affect poverty dynamics. Tax and redistribution systems that influence the extent to which economic gains are broadly shared
- Political institutions and factors shaping the conversion of economic resources into political influence
- More evidence is needed directly examining the link between wealth inequality and poverty - most of the evidence concerns income inequality. This can include an examination of net effects and an assessment of the overall balance of these effects and the institutional conditions under which wealth concentration is more or less compatible with poverty reduction
- There is a clear lack of research around wealth concentration and extreme wealth in relation to inclusive growth and the triangle inequality-growth-poverty
- More research on the impact of policy capture and poverty is needed. Current evidence focuses on unequal responsiveness rather than on how policy capture by wealthy actors bears on poverty outcomes or its impact on poverty reduction
- Beyond income poverty, more research on the impact of extreme wealth and wealth concentration on a range of forms of disadvantage could explore links with housing deprivation, material deprivation, debt stress, insecurity, or broader multidimensional poverty indicators
- More cross-country comparative research can strengthen the assessment of mechanisms and examine how institutional factors (welfare regimes, housing systems, labour-market institutions, tax systems) mediate the relationship between extreme wealth concentration and poverty outcomes
Growth, inequality and poverty:
- Lakner, C., Mahler, D. G., Negre, M., & Prydz, E. B. (2022). How much does reducing inequality matter for global poverty? The Journal of Economic Inequality, 20(3), 559-585.
- World Bank. (2024). Poverty, prosperity, and planet report 2024: Pathways out of the polycrisis. World Bank.
- Bergstrom, K., & Bergstrom, K. (2022). The role of inequality for poverty reduction. Open Knowledge Repository: World Bank
Wealth concentration and financial crises:
- Jakurti, E. (2025). Wealth Inequality, Asset Price Bubbles and Financial Crises. WORKING PAPER No.2025/01. World Inequality Lab
Housing financialisation, poverty and affordabilty:
- Dewilde, C. (2022). How housing affects the association between low income and living conditions-deprivation across Europe. Socio-economic review, 20(1), 373-400.
- Hochstenbach, C. (2022). Landlord Elites on the Dutch Housing Market: Private Landlordism, Class, and Social Inequality. Economic Geography, 98(4), 327-354.
- Bandoni, E., De Nora, G., Giuzio, M., Ryan, E., & Storz, M. (2025). Institutional investors and house prices (ECB Working Paper No. 3026). European Central Bank.
