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1 Macroeconomics+ World+Distribu3on+of+Income+ XAVIER+SALA=I=MARTIN+(26)+ ECON+321+

2 Ques3ons+ Do+you+have+any+percep3ons+that+existed+ before+reading+this+paper+that+have+been+ altered?++ What+are+your+thoughts+about+the+direc3on+of+ poverty+in+the+world?+ What+do+you+think+about+the+phrase+ The+rich+ are+getng+richer+while+the+poor+get+poorer? +

3 World+Distribu3on+of+Income+ XAVIER+SALA=I=MARTIN+(26)+ We+es3mate+the+World+Distribu3on+of+Income+by+integra3ng+ individual+income+distribu3ons+for+138+countries+between+197+and Country+distribu3ons+are+constructed+by+combining+na3onal+ accounts+gdp+per+capita+to+anchor+the+mean+with+survey+data+to+ pin+down+the+dispersion.++ Poverty+rates+and+head+counts+are+reported+for+four+specific+poverty+ lines.+rates+in+2+were+between+one=third+and+one=half+of+what+ they+were+in+197+for+all+four+lines.++ There+were+between+25+and+5+million+fewer+poor+in+2+than+ in We+es3mate+eight+indexes+of+income+inequality+implied+by+our+ world+distribu3on+of+income.+all+of+them+show+reduc3ons+in+global+ inequality+during+the+198s+and+199s.++

4 Convergence+and+Divergence+ The+convergence+literature+convincingly+ established+divergence+among+countries+in+ two+dimensions:++ 1. Growth+rates+of+poor+countries+have+been+lower+ than+the+growth+rates+of+their+rich+counterparts The+dispersion+of+income+per+capita+across+ countries+has+tended+to+increase+over+3me.+

5 Convergence+and+Divergence+ Both+these+literatures+analyzed+aspects+of+the+ WDI,+and+used+countries+as+their+unit+of+ analysis.++ Good+to+account+for+growth+ It+is+not+useful+to+study+human+welfare+because+ different+countries+have+different+popula3on+sizes.++ there+is+no+reason+to+down=weight+the+well=being+of+ a+chinese+peasant+rela3ve+to+a+senegalese+farmer+just+ because+the+popula3on+in+china+is+larger+than+that+of+ Senegal. ++

6 Without+Popula3on+Weigh3ng+

7 With+Popula3on+Weigh3ng+

8 Popula3on+Weigh3ng+ The+nega3ve+rela3on+between+growth+and+the+ ini3al+level+of+income+is+apparent:++ 1. The+few+countries+in+Asia+that+have+converged+to+ income+levels+of+the+oecd+are+large+and+ populous.+ 2. Many+of+the+countries+that+have+diverged+(chiefly+ African+countries)+are+not Africa+gets+41+3mes+the+weight+of+China+but+the+ total+popula3on+of+the+41+african+na3ons+is+ about+half+of+that+of+china+or+india.+

9 Popula3on+Weigh3ng+in+This+Paper+ Popula3on+weigh3ng+is+not+sufficient+to+ provide+accurate+es3mates+of+concepts+like+ poverty+rates+or+indexes+of+income+inequality.+ +These+measures+s3ll+miss+within=country+ dispersion.+ It+assumes+that+all+ci3zens+of+a+country+have+the+same+ level+of+income+corresponding+to+the+per+capita+income+ implied+by+the+na3onal+accounts.++

10 Within+Country+Distribu3ons++ (UNU=WIDER)++ Incorporates+informa3on+about+the+within= country+distribu3on+of+138+countries+from+ 197+=+2.+ Data+Comes+from+microeconomic+surveys+ conducted+in+a+variety+of+countries+over+the+ last+3+years.++

11 Within+Country+Distribu3ons+ (UNU=WIDER)++ Problems+ 1. Many+countries+are+missing+completely.+ 2. Many+countries+are+missing+some+years.+ Addressing+the+Problems+ 1. For+countries+with+no+survey+informa3on,+we+assign+ the+average+quin3le+income+shares+of+the+ neighboring+region +(defined+in+sec3on+ii).+ 2. Imputes+the+missing+years+by+forecas3ng+income+ shares+for+the+countries+for+which+mul3ple+surveys+ are+available.++

12 Figure II.A: Distribution of Income in China 12, $1/day 1, thousands of people 8, 6, 4, 2, $1 $1, $1, $1, Figure II.B: Distribution of Income in India 1, $1/day 8, thousands of people 6, 4, 2, $1 $1, $1, $1, Figure II.C: Distribution of Income in USA 18, 16, 14, thousands of people 12, 1, 8, 6, 4, 2, $1, $1, $1, $1,,

13 Figure II.D: Distribution of Income in Indonesia 2, 18, $1/day 16, thousands of people 14, 12, 1, 8, 6, 4, 2, $1 $1, $1, $1, Figure II.E: Distribution of Income in Brazil 8, $1/day 7, 6, Thousands of People 5, 4, 3, 2, 1, $1 $1, $1, $1, Figure II.F: Distribution of Income in Nigeria 14, $1/day 12, 1, Thousands of People 8, 6, 4, 2, $1 $1 $1, $1, $1,

14 Figure II.G: Distribution of Income in USSR-FSU 25, 2, thousands of people 15, 1, 5, $1 $1, $1, $1, Figure III.A: The WDI and Individual Country Distributions in 197 2, 16, $1/day World thousands of people 12, 8, India China 4, USSR Japan USA $1 $1, $1, $1, Individual Countries World Figure III.B: The WDI and Individual Country Distributions in 2 28, 24, $1/day World 2, thousands of people 16, 12, India 8, China 4, Nigeria FSU Japan USA $1 $1, $1, $1, Individual Countries World 45

15 Figure IV: The WDI in Various Years 3, $1/day 25, thousands of people 2, 15, 1, 5, $1 $1, $1, $1, Figure V: Cumulative Distribution Functions (Various Years) 1 $57/year $5/year % 16% 1% 7% $2/year 62% 54% 5% 41% 78% 75% 73% 67% $1 $1, $1, $1, Figure VI: Poverty Rates 5% 45% 4% 35% 3% 25% 2% 15% 1% 5% % $ ('Figures for Paper'!$M$29$1/day) 57$ ($1.5/day) 73$ ($2/day) 114$ ($3/day) 46

16 Figure VII: Regional Poverty Rates ($1.5 a day line) 6% 5% 4% 3% 2% 1% % Africa Latin America East Asia South Asia Middel East and NA Eastern Europe and CA China Asia-China Figure VIII: World Income Inequality: Gini Figure IX: Gini Coefficient Excluding Various Countries All Countries NO China NO USA NO Africa NO Africa and China and USA 47

17 Poverty Rates TABLE II POVERTY BY REGION (ORIGINAL WB POVERTY LINE, $1.5/DAY OR $57/YEAR) 2 population World 5,66, East Asia 1,74, South Asia 1,327, Africa 68, Latin America 499, Eastern Europe 436, MENA 22, Poverty Headcounts 2 population World 5,66,4 699,896 78, , , , , ,43 31,493 34,115 17,56 96,818 East Asia 1,74,242 35, , , ,25 154,973 61,625 41,71 39,192 68, , ,92 South Asia 1,327, , ,7 236, , ,661 69,582 33, ,926 25,2 122,75 8,223 Africa 68,221 93,528 19, ,89 172,175 24, , ,733 23,25 36,361 74,474 92,369 Latin America 499,716 27,897 17,14 1,195 13,836 17,46 17,379 21,12 6,885 17,72 7,211 3,67 Eastern Europe 436,373 4,59 1,991 1, ,96 4,238 4, , ,496 MENA 22,26 11,25 1,954 4,991 2,57 2,11 1,466 1,264 9,986 6,259 2, s 197s 198s 198s 199s 199s 378 QUARTERLY JOURNAL OF ECONOMICS

18 Poverty line Definition TABLE I POVERTY RATES AND HEADCOUNTS FOR VARIOUS POVERTY LINES Poverty rates $495 WB Poverty Line 15.4% 14.% 11.9% 8.8% 7.3% 6.2% 5.7%.97 ($1/Day) $57 $1.5/Day 2.2% 18.5% 15.9% 12.1% 1.% 8.% 7.%.131 $73 $2/Day 29.6% 27.5% 24.2% 19.3% 16.2% 12.6% 1.6%.19 $1,14 $3/Day 46.6% 44.2% 4.3% 34.7% 3.7% 25.% 21.1%.254 Poverty head counts (thousands) Population 3,472,485 3,83,514 4,175,42 4,539,477 4,938,177 5,35,563 5,66,342 2,187,858 Poverty line Definition $495 WB Poverty Line ($1/Day) 533, , ,32 399, ,92 327, , ,343 $57 $1.5/Day 699,896 78, , , , , ,43 31,493 $73 $2/Day 1,28,532 1,52,761 1,8, , , ,69 6, ,257 $1,14 $3/Day 1,616,772 1,691,184 1,681,712 1,575,415 1,517,778 1,327,635 1,197,8 419, QUARTERLY JOURNAL OF ECONOMICS Poverty Rates are the percentages of citizens with incomes below the corresponding poverty line. Poverty head counts are constructed as the total number of people with incomes lower than the corresponding poverty line. The first poverty line (called WB poverty or 1$/Day) line is the poverty line originally used by the World Bank and corresponds to $1.5/Day in 1985 prices. This corresponds to $495 per year in 1996 prices. The second poverty line is the one used by Bhalla [22], which increases the WB by 15 percent to adjust for underreporting at the top of the distribution. This corresponds to $57 per year or, roughly, $1.5/Day. The third and fourth lines correspond to $2/Day and $3/Day in 1996 prices ($73 and $114 per year, respectively).

19 Fraction of World s poor in each region TABLE II (CONTINUED) 2 population World 1.% 1.% 1.% 1.% 1.% 1.% 1.% 1.% East Asia 3.1% 5.% 47.2% 42.3% 33.2% 31.3% 14.5% 1.3% 39.7% 7.7% 11.% 21.% South Asia 23.5% 3.2% 33.% 35.5% 32.2% 23.% 16.4% 8.4% 21.8% 5.3% 12.6% 14.6% Africa 1.7% 13.4% 15.4% 19.5% 31.4% 41.3% 63.5% 74.5% 61.1% 6.1% 21.8% 33.2% Latin America 8.8% 4.% 2.4% 1.5% 2.5% 3.5% 4.1% 5.3% 1.3% 2.5% 2.% 1.8% Eastern Europe 7.7%.7%.3%.2%.1%.4% 1.% 1.1%.4%.4%.2%.7% MENA 3.9% 1.6% 1.5%.7%.5%.4%.3%.3% 1.3%.9%.3%.1% The countries included in each region are as follows. (1) East Asia: China, Fiji, Indonesia, Korea, Malaysia, Philippines, Papua New Guinea, Thailand, and Taiwan. (2) South Asia: Bangladesh, India, Sri Lanka, Nepal, and Pakistan. (3) Africa: Angola, Burundi, Benin, Burkina Faso, Botswana, CAR, Ivory Coast, Cameroon, Congo, DR Congo former Zaire, Comoros, Cape Verde, Ethiopia, Gabon, Gambia, Ghana, Guinea, Guinea-Bissau, Equatorial Guinea, Kenya, Lesotho, Madagascar, Mali, Mozambique, Mauritius, Malawi, Namibia, Niger, Nigeria, Rwanda, Senegal, Seychelles, Togo, Tanzania, Uganda, South Africa, Zambia, Zimbabwe, Sao Tome e Principe, Chad, and Sierra Leone. (4) Latin America: Antigua Argentina, Belize Bolivia, Brazil, Barbados, Chile, Colombia, Costa Rica, Dominica, Dominican Republic, Ecuador, Grenada, Guatemala, Guyana, Haiti, Honduras, Jamaica, Mexico, Nicaragua, Paraguay, Panama, Peru, El Salvador, Saint Kitts and Nevis, Saint Lucia, Saint Vincent, and the Grenadines, Trinidad and Tobago, Uruguay, and Venezuela. (5) Eastern Europe: Romania, Turkey, Czechoslovakia, Poland, Hungary, and Soviet Union/Former Soviet Union. (6) Middle East and North Africa (MENA): Egypt, Iran, Jordan, Morocco, Mauritania, Syria, Tunisia, and Algeria. 197s 198s 199s THE WORLD DISTRIBUTION OF INCOME 379

20 What+is+True+and+What+is+False?+ 21+Human+Development+Report+of+the+United+ Na3ons +Development+Program+(UNDP)+argues+ that+global+income+inequality+has+risen+based+on+ the+following+logic:++ Claim+1:+ Income+inequali3es+within+countries+have+ increased. +: +TRUE+ Claim+2:+ Income+inequali3es+across+countries+have+ increased. +: +True+ Conclusion:+ Global+income+inequali3es+have+also+ increased. +:+ +False+

21 Quick+Video+ Hans+Rosling+:+From+6:25+ hlp:// hans_rosling_shows_the_best_stats_you_ve_ ever_seen.html+

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