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Accelerating Convergence in the World Income Distribution

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  • Tim Kane

Abstract

In the 1990s, cross-country empirical data suggested that the world income distribution was diverging into two peaks, rich and relatively poor. With the passing of time, we can update that empirical analysis by calculating a Markov transition matrix for the most recent two decades. This paper presents the clearest empirical picture to date of how the world income distribution has changed every succeeding decade from 1960 to 2010. This paper also compares transition matrices for 122 countries over two periods, 1970-90 and 1990-2010 and finds that divergence in the earlier period has shifted to convergence in the latter. Further, differencing the two matrices shows how the dynamic is itself evolving. Projecting these dynamics forward suggests rapid growth across all regions over the coming century that will bring nearly all countries to within 80 percent of the per capita income frontier.

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  • Tim Kane, 2016. "Accelerating Convergence in the World Income Distribution," Economics Working Papers 16102, Hoover Institution, Stanford University.
  • Handle: RePEc:hoo:wpaper:16102
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    References listed on IDEAS

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    1. Parmeter, Christopher F., 2008. "The effect of measurement error on the estimated shape of the world distribution of income," Economics Letters, Elsevier, vol. 100(3), pages 373-376, September.
    2. Robert C. Feenstra & Robert Inklaar & Marcel P. Timmer, 2015. "The Next Generation of the Penn World Table," American Economic Review, American Economic Association, vol. 105(10), pages 3150-3182, October.
    3. Xavier Sala-i-Martin, 2006. "The World Distribution of Income: Falling Poverty and … Convergence, Period," The Quarterly Journal of Economics, Oxford University Press, vol. 121(2), pages 351-397.
    4. Charles I. Jones, 1997. "On the Evolution of the World Income Distribution," Journal of Economic Perspectives, American Economic Association, vol. 11(3), pages 19-36, Summer.
    5. Quah, Danny, 1993. "Empirical cross-section dynamics in economic growth," European Economic Review, Elsevier, vol. 37(2-3), pages 426-434, April.
    6. Robert E. Lucas, 2000. "Some Macroeconomics for the 21st Century," Journal of Economic Perspectives, American Economic Association, vol. 14(1), pages 159-168, Winter.
    7. Lant Pritchett, 1997. "Divergence, Big Time," Journal of Economic Perspectives, American Economic Association, vol. 11(3), pages 3-17, Summer.
    8. Robert Summers & Alan Heston, 1991. "The Penn World Table (Mark 5): An Expanded Set of International Comparisons, 1950–1988," The Quarterly Journal of Economics, Oxford University Press, vol. 106(2), pages 327-368.
    9. Abramovitz, Moses, 1986. "Catching Up, Forging Ahead, and Falling Behind," The Journal of Economic History, Cambridge University Press, vol. 46(02), pages 385-406, June.
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    Cited by:

    1. Matkowski, Zbigniew & Prochniak, Mariusz & Rapacki, Ryszard, 2016. "Real Income Convergence between Central Eastern and Western Europe: Past, Present, and Prospects," EconStor Conference Papers 146992, ZBW - German National Library of Economics.

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