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Is the developing world catching up ? global convergence and national rising dispersion

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Author Info

  • Bussolo, Maurizio
  • De Hoyos, Rafael E.
  • Medvedev, Denis

Abstract

The present study uses the GIDD, a CGE-microsimulation model for Global Income Distribution Dynamics, to understand the ex-ante dynamics of global income distribution. Three main robust results emerge. First, under a set of realistic assumptions, there will be a reduction in global income inequality by 2030. This potential reduction can be fully accounted for by the projected convergence in average incomes across countries, with poor and populous countries growing faster than the rest of the world. Second, this convergence process will be accompanied by a widening of income distribution in two-thirds of the developing countries; the main cause being increasing skill premia. Third, a trend that may counter-balance the potential anti-globalization sentiment is the emergence of a global middle class: a group of consumers who demand access to, and have the means to purchase, international goods and services. The results show that the share of these consumers in the global population is likely to more than double in the next 20 years. These ex-ante trends in global income distribution suggest that the mid-1990s could be seen as a turning point after which global inequality began showing a negative tendency.

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Bibliographic Info

Paper provided by The World Bank in its series Policy Research Working Paper Series with number 4733.

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Date of creation: 01 Sep 2008
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Handle: RePEc:wbk:wbrwps:4733

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Related research

Keywords: Inequality; Poverty Impact Evaluation; Economic Theory&Research; Achieving Shared Growth; Emerging Markets;

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References

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  1. Francois Bourguignon & Victoria Levin & David Rosenblatt, 2004. "Declining International Inequality and Economic Divergence: Reviewing the Evidence Through Different Lenses," Economie Internationale, CEPII research center, issue 100, pages 13-26.
  2. Branko Milanovic, 2002. "True World Income Distribution, 1988 and 1993: First Calculation Based on Household Surveys Alone," Economic Journal, Royal Economic Society, vol. 112(476), pages 51-92, January.
  3. Eduardo Lora & Mauricio Olivera, 2005. "The Electoral Consequences of the Washington Consensus," Journal of LACEA Economia, LACEA - LATIN AMERICAN AND CARIBBEAN ECONOMIC ASSOCIATION.
  4. Milanovic, Branko & Shlomo Yitzhaki, 2001. "Decomposing world income distribution : does the world have a middle class ?," Policy Research Working Paper Series 2562, The World Bank.
  5. Ravallion, Martin, 2003. "Inequality convergence," Economics Letters, Elsevier, vol. 80(3), pages 351-356, September.
  6. Mayda, Anna Maria & Rodrik, Dani, 2005. "Why are some people (and countries) more protectionist than others?," European Economic Review, Elsevier, vol. 49(6), pages 1393-1430, August.
  7. Xavier Sala-i-Martin, 2006. "The World Distribution of Income: Falling Poverty and ... Convergence, Period," The Quarterly Journal of Economics, MIT Press, vol. 121(2), pages 351-397, May.
  8. Maurizio Bussolo & Rafael E De Hoyos & Denis Medvedev, 2010. "Economic growth and income distribution: linking macro-economic models with household survey data at the global level," International Journal of Microsimulation, Interational Microsimulation Association, vol. 3(1), pages 92-103.
  9. Xavier Sala-i-Martin, 2002. "The Disturbing "Rise" of Global Income Inequality," NBER Working Papers 8904, National Bureau of Economic Research, Inc.
  10. Gilbert,Christopher L. & Vines,David (ed.), 2006. "The World Bank," Cambridge Books, Cambridge University Press, number 9780521029018.
  11. Bussolo, Maurizio & Lay, Jann & van der Mensbrugghe, Dominique, 2006. "Structural change and poverty reduction in Brazil : the impact of the Doha Round," Policy Research Working Paper Series 3833, The World Bank.
  12. François Bourguignon & Christian Morrisson, 2002. "Inequality Among World Citizens: 1820-1992," American Economic Review, American Economic Association, vol. 92(4), pages 727-744, September.
  13. Xavier Sala-i-Martin, 2002. "The World Distribution of Income (estimated from Individual Country Distributions)," NBER Working Papers 8933, National Bureau of Economic Research, Inc.
  14. Ferreira, Francisco H.G. & Ravallion, Martin, 2008. "Global poverty and inequality : a review of the evidence," Policy Research Working Paper Series 4623, The World Bank.
  15. Ravallion, Martin, 2004. "Competing concepts of inequality in the globalization debate," Policy Research Working Paper Series 3243, The World Bank.
  16. Francisco H. G. Ferreira & Phillippe G. Leite, 2003. "Meeting the Millennium Development Goals in Brazil: Can Microeconomic Simulations Help?," Journal of LACEA Economia, LACEA - LATIN AMERICAN AND CARIBBEAN ECONOMIC ASSOCIATION.
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Cited by:
  1. Anderson, Kym & Cockburn, John & Martin, Will, 2010. "Would Freeing Up World Trade Reduce Poverty and Inequality? The Vexed Role of Agricultural Distortions," CEPR Discussion Papers 7749, C.E.P.R. Discussion Papers.
  2. Mustafa Yavuz Cakir & Alain Kabundi, 2011. "Trade Shocks from BRIC to South Africa: A Global VAR Analysis," Working Papers 250, Economic Research Southern Africa.

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