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Parametric Estimations of the World Distribution of Income

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  • Maxim Pinkovskiy
  • Xavier Sala-i-Martin

Abstract

We use a parametric method to estimate the income distribution for 191 countries between 1970 and 2006. We estimate the World Distribution of Income and estimate poverty rates, poverty counts and various measures of income inequality and welfare. Using the official $1/day line, we estimate that world poverty rates have fallen by 80% from 0.268 in 1970 to 0.054 in 2006. The corresponding total number of poor has fallen from 403 million in 1970 to 152 million in 2006. Our estimates of the global poverty count in 2006 are much smaller than found by other researchers. We also find similar reductions in poverty if we use other poverty lines. We find that various measures of global inequality have declined substantially and measures of global welfare increased by somewhere between 128% and 145%. We analyze poverty in various regions. Finally, we show that our results are robust to a battery of sensitivity tests involving functional forms, data sources for the largest countries, methods of interpolating and extrapolating missing data, and dealing with survey misreporting.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 15433.

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Date of creation: Oct 2009
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Handle: RePEc:nbr:nberwo:15433

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Citations

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Cited by:
  1. Charles-Coll, Jorge A., 2010. "The optimal rate of inequality: A framework for the relationship between income inequality and economic growth," MPRA Paper 28921, University Library of Munich, Germany.
  2. ARATA Yoshiyuki, 2013. "Income Distribution among Individuals: The effects of economic interactions," Discussion papers 13042, Research Institute of Economy, Trade and Industry (RIETI).
  3. Dhongde, Shatakshee & Minoiu, Camelia, 2013. "Global Poverty Estimates: A Sensitivity Analysis," World Development, Elsevier, vol. 44(C), pages 1-13.
  4. Beegle, Kathleen & De Weerdt, Joachim & Friedman, Jed & Gibson, John, 2012. "Methods of household consumption measurement through surveys: Experimental results from Tanzania," Journal of Development Economics, Elsevier, vol. 98(1), pages 3-18.
  5. Darryl McLeod & Nora Lustig, 2011. "Inequality and poverty under Latin America’s new left regimes," Working Papers 208, ECINEQ, Society for the Study of Economic Inequality.
  6. Yurko, Anna V., 2011. "How does income inequality affect market outcomes in vertically differentiated markets?," International Journal of Industrial Organization, Elsevier, vol. 29(4), pages 493-503, July.
  7. Facundo Alvaredo & Leonardo Gasparini, 2013. "Recent Trends in Inequality and Poverty in Developing Countries," CEDLAS, Working Papers 0151, CEDLAS, Universidad Nacional de La Plata.
  8. Thomas Goda, 2013. "Changes in income inequality from a global perspective: an overview," Working Papers PKWP1303, Post Keynesian Economics Study Group (PKSG).
  9. Pinkovskiy, Maxim L., 2014. "World welfare is rising: estimation using nonparametric bounds on welfare measures," Staff Reports 662, Federal Reserve Bank of New York.

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