Global income inequality: new results and implications for 21 st century policy Branko Milanovic Spring 2011 Email: bmilanovic@worldbank.org Based on the books Worlds Apart, 2005 and The Haves and the Have-Nots, 2010 and other updates
Main points Global inequality (between world citizens) is some 70 Gini point today This is the result obtained using new (2005) PPPs About 9 percent of world population receives onehalf of global income (or consumes ½ of goods and services); bottom ½ gets 7%, top 1% gets 13% of global income. Global inequality shows no clear trend in the last 20 years although China s and India s growth are globally equalizing This is almost certainly the highest level of relative, and certainly absolute, global inequality at any point in human history
Main points II The composition of global inequality has changed from being driven by income differences within countries ( class differences) to income differences between countries ( locational ) More than ¾ of global inequality due to between country differences Migration is the product of globalization and large between country differences
Gini coefficient.45.55.65.75 Inequality 1950-2009 The mother of all inequality disputes Concept 2 Concept 1 Divergence begins China moves in Concept 3 India moves in Divergence ends 1950 1960 1970 1980 1990 2000 2010 year With new PPPs Graph in interyd\dofiles\defines.do
Population coverage 1988 1993 1998 2002 2005 Africa 48 76 67 77 78 Asia 93 95 94 96 94 E.Europe 99 95 100 97 93 LAC 87 92 93 96 96 WENAO 92 95 97 99 99 World 87 92 92 94 93 Non-triviality of the omitted countries (Maddison vs. WDI)
Number of surveys (C-based) 1988 1993 1998 2002 2005 Africa 14(11) 30(27) 24(24) 29(29) 32(30) Asia 19(10) 26(18) 28(20) 26(18) 23(16) EEurope 27(0) 22(0) 27(14) 25(16) 27(25) LAC 19(1) 20(4) 22(2) 21(1) 18(0) WENAO 23(0) 23(0) 21(3) 21(2) 22(0) World 102(22) 121(52) 122(63) 122(66) 122(71)
International unweighted and population- weighted inequality, 1952-2009 Gini coefficient in percent.45.5.55.6.65 Concept 2 Concept 2 without China Concept 1 1950 1960 1970 1980 1990 2000 2010 year India as new engine of equalization Graph in interyd\dofiles\defines.do; using gdppppreg.dta
What does Gini of 70 mean?.3.4.5.6.7 Brazil World Sweden 1970 1980 1990 2000 2010 year twoway (scatter gini_disposable year if contcod=="twn", c(l)) (scatter gini_disposable year if contcod=="", c (l)) (scatter gini_gross year if contcod=="" & source=="sedlac", c(l) legend(off) text(0.30 2005 "Sweden") text(0.42 2004 "") text(0.63 2001 "Brazil")) (scatter gini_disposable year if contcod=="wrl", c(l) text(0.72 200 5 "World")) Using data_voter_checked.dta to which I added the world from my global data
Different countries and income classes in global income distribution in 2005 (new PPP) percentile of world income distribution 1 10 20 30 40 50 60 70 80 90 100 Russia Brazil China India 1 5 10 15 20 country ventile From michele_graph.txt
Global percentile positions (income levels in $PPP) in Denmark and selected African countries percentile of world income distribution 1 10 20 30 40 50 60 70 80 90 100 Denmark Mozambique Mali Tanzania Uganda 1 5 10 15 20 country ventile Based on B. Milanovic, Worlds Apart: Measuring International and Global Inequality
The impact of new PPPs Concept 2 inequality increased by almost 10 Gini points (a level shift) Somewhat steeper decline of Concept 2 inequality in the last decade (because India and China now appear poorer) About 5 Gini points increase in Concept 1 inequality (shift effect; no trend effect) About 5 Gini points increase in global inequality (Concept 2 increases more than Concept 3 smaller overlap as mean incomes move further apart)
(cont.) World poorer than we thought, Asia in particular Inequality (in all formulations) greater Growth rates not affected in WDI but will be affected in PWT; so the past will now change (like in Orwell) Two engines of global equalization : China and India
Pattern of change in estimated price levels: increases in poorer and more populous countries (both highly sign. in a regression) change in price level.5 1 1.5 2 2.5 3 Zaire Ethiopia India China Brazil 6 7 8 9 10 11 lngdppp before the change twoway (scatter price_level_change lngdpppp_old [w=totpop], yline(1)) (qfit price_level_change lngdpppp_old [w=totpop]), text(2.3 8.5 "China") text(1.7 7 "India") text(1.4 8.8 "Brazil") text(1.3 8.2 "") text(3 6.5 "Zaire") text(2.35 6.5 "Ethiopia") ytitle(change in price level) xtitle(lngdppp before the change) legend(off) From graph2.do and world2002.dta
Ratio of the new country price levels to the old SGP SGP SGP SGP SGP.5 1 1.5 2 2.5.5 1 1.5 2 2.5 6 8 10 12 6 8 10 12 6 8 10 12 Africa Asia Latin America Eastern Europe West new price level over old price level lngpppp before changes Graphs by 5 regions twoway scatter price_level_change lngdpppp_old, ylabel(0.5(0.5)2.5) yline(1) mlabel(contcod) /* */ by(region) ytitle(new price level over old price level) xtitle(lngpppp before changes) From graph2.do and world2002.dta
The crisis that was not? People s and plutocratic growth rates, 1952-2009 -.05 0.05.1 people's plutocratic 1950 1960 1970 1980 1990 2000 2010 year Using gdppppreg,dta and defines.do