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Global redistribution of income

Author

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  • Bourguignon, Francois
  • Levin, Victoria
  • Rosenblatt, David

Abstract

The actual distribution of world income across countries is extremely unequal, much higher than the within country inequality faced by most countries. The question studied in this paper is: How do international policies on aid, trade, and factor movements affect the international distribution of income? To begin to answer this question, the authors calculate the impact by decile of the actual level of aid flows and the effect on potential income of merchandise trade restrictions by high-income countries. They find that aid's distributional impact is equality enhancing. While it is extremely small in terms of changes in standard inequality measures, it is of some importance for the lowest decile of the world's income distribution. The authors also find that some of this impact is counteracted by lost potential income in the lower deciles from merchandise trade barriers imposed by high-income countries. In brief, there is a contradiction in international policies where aid's equality-enhancing effect is somewhat offset by protectionism. They also discuss some of the analytical difficulties with extending this analysis ofredistribution to other forms of international factor flows-more specifically, migrant worker and profit remittances. The analysis presented is partial and static and ignores within country distribution. As such, the authors suggest that future research should explore the distributional consequences of the broader general equilibrium effects, dynamic effects, and externalities associated with aid, trade, and factor flows. Future research should also analyze the within country distributional impacts of international policies.

Suggested Citation

  • Bourguignon, Francois & Levin, Victoria & Rosenblatt, David, 2006. "Global redistribution of income," Policy Research Working Paper Series 3961, The World Bank.
  • Handle: RePEc:wbk:wbrwps:3961
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    References listed on IDEAS

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    1. Bhagwati, Jagdish N & Brecher, Richard A & Hatta, Tatsuo, 1983. "The Generalized Theory of Transfers and Welfare: Bilateral Transfers in a Multilateral World," American Economic Review, American Economic Association, vol. 73(4), pages 606-618, September.
    2. Ravallion, Martin, 2001. "Growth, Inequality and Poverty: Looking Beyond Averages," World Development, Elsevier, vol. 29(11), pages 1803-1815, November.
    3. Kopczuk, Wojciech & Slemrod, Joel & Yitzhaki, Shlomo, 2005. "The limitations of decentralized world redistribution: An optimal taxation approach," European Economic Review, Elsevier, vol. 49(4), pages 1051-1079, May.
    4. Surjit Bhalla, 2002. "Imagine There's No Country: Poverty, Inequality, and Growth in the Era of Globalization," Peterson Institute Press: All Books, Peterson Institute for International Economics, number 348.
    5. David Dollar & Craig Burnside, 2000. "Aid, Policies, and Growth," American Economic Review, American Economic Association, vol. 90(4), pages 847-868, September.
    6. William Easterly & Ross Levine & David Roodman, 2003. "New Data, New doubts: A Comment on Burnside and Dollar's "Aid, Policies, and Growth" (2000)," NBER Working Papers 9846, National Bureau of Economic Research, Inc.
    7. 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.
    8. Michael A. Clemens & Steven Radelet & Rikhil Bhavnani, 2004. "Counting chickens when they hatch: The short-term effect of aid on growth," International Finance 0407010, EconWPA.
    9. 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.
    10. 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.
    11. Ozler, Berk, 2007. "Not Separate, Not Equal: Poverty and Inequality in Post-apartheid South Africa," Economic Development and Cultural Change, University of Chicago Press, vol. 55(3), pages 487-529, April.
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    Cited by:

    1. Anthony B. Atkinson & Andrea Brandolini, 2010. "On Analyzing the World Distribution of Income," World Bank Economic Review, World Bank Group, vol. 24(1), pages 1-37, January.
    2. Bourguignon, François & Levin, Victoria & Rosenblatt, David, 2009. "International Redistribution of Income," World Development, Elsevier, vol. 37(1), pages 1-10, January.
    3. 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.
    4. David Anthoff & Johannes Emmerling, 2016. "Inequality and the Social Cost of Carbon," Working Papers 2016.54, Fondazione Eni Enrico Mattei.
    5. Milanovic, Branko, 2007. "Ethical case and economic feasibility of global transfers," MPRA Paper 2587, University Library of Munich, Germany.

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    Keywords

    Economic Theory&Research; Inequality; Country Strategy&Performance; Poverty Impact Evaluation; Population Policies;

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