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The Disturbing 'Rise' of Global Income Inequality

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Author Info
Xavier Sala-i-Martin ()

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Abstract

We use aggregate GDP data and within-country income shares for the period 1970-1998 to assign a level of income to each person in the world. We then estimate the gaussian kernel density function for the worldwide distribution of income. We compute world poverty rates by integrating the density function below the poverty lines. The $1/day poverty rate has fallen from 20% to 5% over the last twenty five years. The $2/day rate has fallen from 44% to 18%. There are between 300 and 500 million less poor people in 1998 than there were in the 70s. We estimate global income inequality using seven different popular indexes: the Gini coefficient, the variance of log-income, two of Atkinson’s indexes, the Mean Logarithmic Deviation, the Theil index and the coefficient of variation. All indexes show a reduction in global income inequality between 1980 and 1998. We also find that most global disparities can be accounted for by across-country, not within-country, inequalities. Within-country disparities have increased slightly during the sample period, but not nearly enough to offset the substantial reduction in across-country disparities. The across-country reductions in inequality are driven mainly, but not fully, by the large growth rate of the incomes of the 1.2 billion Chinese citizens. Unless Africa starts growing in the near future, we project that income inequalities will start rising again. If Africa does not start growing, then China, India, the OECD and the rest of middle-income and rich countries diverge away from it, and global inequality will rise. Thus, the aggregate GDP growth of the African continent should be the priority of anyone concerned with increasing global income inequality.

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Paper provided by Department of Economics and Business, Universitat Pompeu Fabra in its series Economics Working Papers with number 616.

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Date of creation: Aug 2001
Date of revision: Apr 2002
Handle: RePEc:upf:upfgen:616

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Related research
Keywords: Income inequality; poverty; convergence; growth;

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Find related papers by JEL classification:
D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
F0 - International Economics - - General
I30 - Health, Education, and Welfare - - Welfare and Poverty - - - General
I32 - Health, Education, and Welfare - - Welfare and Poverty - - - Measurement and Analysis of Poverty
O00 - Economic Development, Technological Change, and Growth - - General - - - General

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  1. David Dollar, 2002. "Global Economic Integration and Global Inequality," RBA Annual Conference Volume, in: David Gruen & Terry O'Brien & Jeremy Lawson (ed.), Globalisation, Living Standards and Inequality: Recent Progress and Continuing Challenges Reserve Bank of Australia. [Downloadable!]
  2. repec:att:wimass:1920516 is not listed on IDEAS
  3. Wan, Guanghua & Zhang, Yin, 2007. "Explaining the Poverty Difference between Inland and Costal China: A Regression-based Decomposition Approach," Working Papers UNU-WIDER Research Paper , World Institute for Development Economic Research (UNU-WIDER). [Downloadable!]
    Other versions:
  4. Heshmati, Almas, 2004. "A Review of Decomposition of Income Inequality," IZA Discussion Papers 1221, Institute for the Study of Labor (IZA). [Downloadable!]
  5. Wan, Guanghua & Lu, Ming & Chen, Zhao, 2006. "Globalization and Regional Income Inequality: Empirical evidence from within China," Working Papers RP2006/139, World Institute for Development Economic Research (UNU-WIDER). [Downloadable!]
    Other versions:
  6. Heshmati, Almas, 2004. "Continental and Sub-Continental Income Inequality," IZA Discussion Papers 1271, Institute for the Study of Labor (IZA). [Downloadable!]
    Other versions:
  7. Ravallion, Martin, 2004. "Competing concepts of inequality in the globalization debate," Policy Research Working Paper Series 3243, The World Bank. [Downloadable!]
  8. Thierry Verdier, 2005. "Intégration commerciale « socialement responsable » : une approche en termes d'économie politique," Revue d’économie du développement, De Boeck Université, vol. 19(4), pages 55-121. [Downloadable!]
  9. Heshmati, Almas, 2004. "The World Distribution of Income and Income Inequality," IZA Discussion Papers 1267, Institute for the Study of Labor (IZA). [Downloadable!]
  10. Timothy M Smeeding, 2002. "Globalisation, Inequality and the Rich Countries of the G-20: Evidence from the Luxembourg Income Study (LIS)," RBA Annual Conference Volume, in: David Gruen & Terry O'Brien & Jeremy Lawson (ed.), Globalisation, Living Standards and Inequality: Recent Progress and Continuing Challenges Reserve Bank of Australia. [Downloadable!]
  11. Francois, Joseph & Rojas-Romagosa, Hugo, 2005. "The Construction and Interpretation of Combined Cross-Section and Time-Series Inequality Datasets," CEPR Discussion Papers 5214, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
    Other versions:
  12. Claudia Biancotti, 2006. "A polarization of inequality? The distribution of national Gini coefficients 1970–1996," Journal of Economic Inequality, Springer, vol. 4(1), pages 1-32, April. [Downloadable!] (restricted)
  13. Josef Novotný, 2007. "On the measurement of regional inequality: does spatial dimension of income inequality matter?," The Annals of Regional Science, Springer, vol. 41(3), pages 563-580, September. [Downloadable!] (restricted)
  14. Zhang, Yin & Wan, Guanghua, 2006. "Globalization and the Urban Poor in China," Working Papers RP2006/42, World Institute for Development Economic Research (UNU-WIDER). [Downloadable!]
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  15. Ann Harrison, 2006. "Globalization and Poverty," NBER Working Papers 12347, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  16. Heshmati, Almas, 2004. "Data Issues and Databases Used in Analysis of Growth, Poverty and Economic Inequality," IZA Discussion Papers 1263, Institute for the Study of Labor (IZA). [Downloadable!]
  17. Giovanni Bigazzi, 2007. "The Role Of Agriculture In The Development Of The People’S Republic Of China," Quaderni del Dipartimento di Economia, Finanza e Statistica 36/2007, Università di Perugia, Dipartimento Economia, Finanza e Statistica. [Downloadable!]
  18. Farhad Noorbakhsh, . "International Convergence and Inequality of Human Development: 1975-2001," Working Papers 2006_3, Department of Economics, University of Glasgow. [Downloadable!]
  19. David Gruen & Terry O'Brien, 2002. "Introduction to Globalisation, Living Standards and Inequality Recent Progress and Continuing Challenges," RBA Annual Conference Volume, in: David Gruen & Terry O'Brien & Jeremy Lawson (ed.), Globalisation, Living Standards and Inequality: Recent Progress and Continuing Challenges Reserve Bank of Australia. [Downloadable!]
  20. Xavier Sala-i-Martin, 2002. "The World Distribution of Income (Estimated from Individual Country Distributions)," Economics Working Papers 615, Department of Economics and Business, Universitat Pompeu Fabra, revised May 2002. [Downloadable!]
    Other versions:
  21. Héctor Galindo Silva, 2007. "Polarización económica y emergencia de confilctos violentos internos un estudio empírico," DOCUMENTOS DE ECONOMÍA 004449, UNIVERSIDAD JAVERIANA - BOGOTÁ. [Downloadable!]
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