The term “local inequality aversion” refers to a principle that it is desirable per se to have lower levels of inequality locally, for instance, within a geographical region or polity, even at the cost of somewhat greater global inequality.

The “inequality” being referred to may be socio-economic inequality, but it may also be inequality of legal, political, and welfare state privileges. For the latter, see the second-class residents page.

There are several aspects to local inequality aversion, discussed below:

• Some people may simply adopt a stance of local inequality aversion because they mistakenly believe that local inequality determines global inequality. In other words, they haven’t thought about compositional effects and how these may obscure the local-global relationship.
• Some may adopt a stance of local inequality aversion out of general principles, such as citizenism and territorialism, that place greater moral weight on people who belong to one’s polity or who live close by.
• Some people may adopt a stance of local inequality aversion due to the belief that local inequality is a symptom of local injustice, whereas global inequality is more likely due to other factors. Bryan Caplan considers this in a blog post titled Traditional Third World Elites: A Qualified Defense.
• Some people oppose local inequality because they are worried about the effects of local inequality in terms of political instability, violence, the undermining of social cohesion, etc. Global inequality, because of its lower immediate visibility, does not pose a similar threat.

Local inequality aversion is a key premise behind many objections to immigration policies that would lead to the influx of large numbers of poor people into the developed world and thus increase inequality within the developed world. It is also used to oppose various keyhole solutions such as guest-worker programs (see second-class residents) and immigration tariffs. In a blog post titled Open Borders with Migration Taxes are the Optimal Policy, Nathan Smith quotes from an eponymous paper of his (emphasis added):

For some reason, economists are less willing to advocate open migration than free trade, even though the traditional free trade models, such as Ricardian comparative advantage and Heckscher-Ohlin, cross-apply to migration. In fact, however, the case for open migration is stronger than the case for free trade, because it is possible to tax foreign-born beneficiaries of open migration policies, through migration taxes. It is here proven that a policy of open borders with migration taxes is Pareto-superior to the alternative of closed borders (or discretionary migration control). Political norms of local inequality aversion seem to prevent the adoption, or even consideration, of such a policy, and the enormous gains in human welfare that would result from it. Some proposals, including a World Migration Organization and passport-free charter cities, are proposed as steps towards a world of open migration.