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Nonlinear Dynamics in Welfare and the Evolution of World Inequality

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  • Davide Fiaschi - Marzia Romanelli

Abstract

We propose a methodology to measure countries’ welfare based on the lifetime utility of individuals and apply it to a large sample of countries. In the period 1960-2000 welfare inequality across countries appears stable as the result of increasing inequality in per capita GDP and decreasing inequality in life expectancy. However, the estimated distribution dynamics of welfare points out the emergence of three clusters of countries in 2000: one composed by low-income and low-life expectancy countries (mainly sub-Saharan countries); one by low-income but medium life expectancy countries (most of the highly populated Asian and Latin American countries); and, finally, the last one by high-income and high-life expectancy countries (almost all OECD countries). Such tendencies to polarisation are expected to strengthen in the future. In terms of the world population distribution, from 1960 to 2000 welfare inequality has been decreasing as the result of the falling inequality of both per capita GDP and life expectancy; this fall is mostly explained by the outstanding performance of the highly populated countries, mainly China and India. However, the decreasing trend is expected to be reverted (at most stabilise) in the future. Finally, the estimated distribution dynamics of welfare shows the emergence of two clusters of population, already detected in the distribution of 2000; such polarisation dynamics is expected to further intensify in the future, with the possible emergence of a cluster of populations from sub-Saharan countries.

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Bibliographic Info

Paper provided by Dipartimento di Economia e Management (DEM), University of Pisa, Pisa, Italy in its series Discussion Papers with number 2009/81.

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Date of creation: 20 Apr 2009
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Handle: RePEc:pie:dsedps:2009/81

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Keywords: distribution of welfare; nonparametric methods; polarisation; distribution dynamics; inequality;

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  1. Danny Quah, 1992. "Empirical cross-section dynamics in economic growth," Discussion Paper / Institute for Empirical Macroeconomics 75, Federal Reserve Bank of Minneapolis.
  2. Durlauf, Steven N. & Quah, Danny T., 1999. "The new empirics of economic growth," Handbook of Macroeconomics, in: J. B. Taylor & M. Woodford (ed.), Handbook of Macroeconomics, edition 1, volume 1, chapter 4, pages 235-308 Elsevier.
  3. Sherwin Rosen, . "The Value of Changes in Life Expectancy," University of Chicago - Population Research Center 87-14, Chicago - Population Research Center.
  4. Douglas Gollin, 2001. "Getting Income Shares Right," Department of Economics Working Papers 2001-11, Department of Economics, Williams College.
  5. Esteban, J. & Ray, D., 1993. "On the Measurement of Polarization," UFAE and IAE Working Papers 221.93, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC).
  6. Chotikapanich, Duangkamon & Valenzuela, Rebecca & Rao, D S Prasada, 1997. "Global and Regional Inequality in the Distribution of Income: Estimation with Limited and Incomplete Data," Empirical Economics, Springer, vol. 22(4), pages 533-46.
  7. Robert E. Hall & Charles I. Jones, 2005. "The value of life and the rise in health spending," Proceedings, Federal Reserve Bank of San Francisco.
  8. Johnson, Paul A., 2005. "A continuous state space approach to "Convergence by Parts"," Economics Letters, Elsevier, vol. 86(3), pages 317-321, March.
  9. Gary S. Becker & Tomas J. Philipson & Rodrigo R. Soares, 2003. "The Quantity and Quality of Life and the Evolution of World Inequality," NBER Working Papers 9765, National Bureau of Economic Research, Inc.
  10. Ram, Rati, 2006. "State of the "life span revolution" between 1980 and 2000," Journal of Development Economics, Elsevier, vol. 80(2), pages 518-526, August.
  11. Fiaschi, Davide & Lavezzi, Andrea Mario, 2003. " Distribution Dynamics and Nonlinear Growth," Journal of Economic Growth, Springer, vol. 8(4), pages 379-401, December.
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  1. > Schools of Economic Thought, Epistemology of Economics > Heterodox Approaches > Thermoeconomics > The economy system and entropy minimization
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Cited by:
  1. Davide Fiaschi, Andrea Mario Lavezzi and Angela Parenti, 2009. "Counterfactual Distribution Dynamics across European Regions," Discussion Papers 2009/85, Dipartimento di Economia e Management (DEM), University of Pisa, Pisa, Italy.
  2. Davide Fiaschi & Imre Kondor & Matteo Marsili & Valerio Volpati, 2013. "The Interrupted Power Law and The Size of Shadow Banking," Papers 1309.2130, arXiv.org, revised Apr 2014.

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