Do Nations Just Get the Inequality They Deserve? The “Palma Ratio” Re-examined

The main aim of this paper is to take another look at differences in within-nation income distribution in the current era of neoliberal globalisation. The emphasis will be on the study of middle-income countries with high degrees of inequality, especially those that have implemented full-blown economic reforms, such as those in Latin America and Southern Africa. I first examine statistically how unequal is inequality across the world in terms of overall inequality as well as of different groups within each country; then, I analyse why there is so much diversity in terms of distributional outcomes across the world. In doing so it would become apparent why the Gini has already served its purpose as a practical index of income distribution (i.e., how it has passed its sell-by date) and why a new index that I proposed in Palma (2011) — which was later christened the “Palma Ratio” by Alex Cobham and Andy Sumner2 — could be more appropriate to understand issues such as those mentioned above.