Macroeconomics+ World+Distribu3on+of+Income+ XAVIER+SALA=I=MARTIN+(26)+ ECON+321+
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? +
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+ 2.++ 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+197.++ 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.++
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.++ 2. The+dispersion+of+income+per+capita+across+ countries+has+tended+to+increase+over+3me.+
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. ++
Without+Popula3on+Weigh3ng+
With+Popula3on+Weigh3ng+
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.++ 3. 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.+
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.++
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.++
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.++
Figure II.A: Distribution of Income in China 12, $1/day 1, thousands of people 8, 6, 4, 2, $1 $1, $1, $1, 197 198 199 2 Figure II.B: Distribution of Income in India 1, $1/day 8, thousands of people 6, 4, 2, $1 $1, $1, $1, 197 198 199 2 Figure II.C: Distribution of Income in USA 18, 16, 14, thousands of people 12, 1, 8, 6, 4, 2, $1, $1, $1, $1,, 197 198 199 2 43
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, 197 198 199 2 1997 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, 197 198 199 2 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, 197 198 198 2 44
Figure II.G: Distribution of Income in USSR-FSU 25, 2, thousands of people 15, 1, 5, $1 $1, $1, $1, 197 198 1989 199 2 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
Figure IV: The WDI in Various Years 3, $1/day 25, thousands of people 2, 15, 1, 5, $1 $1, $1, $1, 197 198 199 2 Figure V: Cumulative Distribution Functions (Various Years) 1 $57/year $5/year.8.6.4.2 2% 16% 1% 7% $2/year 62% 54% 5% 41% 78% 75% 73% 67% $1 $1, $1, $1, 197 198 198 2 Figure VI: Poverty Rates 5% 45% 4% 35% 3% 25% 2% 15% 1% 5% % 197 1975 198 1985 199 1995 2 495$ ('Figures for Paper'!$M$29$1/day) 57$ ($1.5/day) 73$ ($2/day) 114$ ($3/day) 46
Figure VII: Regional Poverty Rates ($1.5 a day line) 6% 5% 4% 3% 2% 1% % 197 1975 198 1985 199 1995 2 Africa Latin America East Asia South Asia Middel East and NA Eastern Europe and CA China Asia-China Figure VIII: World Income Inequality: Gini.665.66.655.65.645.64.635.63 197 1975 198 1985 199 1995 2 Figure IX: Gini Coefficient Excluding Various Countries.67.66.65.64.63.62.61.6.59.58 All Countries NO China NO USA NO Africa NO Africa and China and USA 47
Poverty Rates TABLE II POVERTY BY REGION (ORIGINAL WB POVERTY LINE, $1.5/DAY OR $57/YEAR) 2 population 197 1975 198 1985 199 1995 2 197 2 World 5,66,4.22.185.159.121.1.8.7.132.43.59.3 East Asia 1,74,242.327.278.217.13.12.38.24.33.11.115.78 South Asia 1,327,455.33.297.267.178.13.57.25.277.36.164.78 Africa 68,221.351.36.372.426.437.55.488.137.2.65.51 Latin America 499,716.13.56.3.36.41.38.42.61.74.12.1 Eastern Europe 436,373.13.5.4.1.4.1.1.3.9.1.6 MENA 22,26.17.92.36.16.12.7.6.12.71.25.6 Poverty Headcounts 2 population 197 1975 198 1985 199 1995 2 197 2 World 5,66,4 699,896 78,825 665,781 548,533 495,221 424,626 398,43 31,493 34,115 17,56 96,818 East Asia 1,74,242 35,263 334,266 281,914 182,25 154,973 61,625 41,71 39,192 68,349 126,941 113,92 South Asia 1,327,455 211,364 234,7 236,366 176,536 113,661 69,582 33,438 177,926 25,2 122,75 8,223 Africa 68,221 93,528 19,491 129,89 172,175 24,364 269,733 296,733 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 1,418 369 1,96 4,238 4,42 188 3,172 488 2,496 MENA 22,26 11,25 1,954 4,991 2,57 2,11 1,466 1,264 9,986 6,259 2,89 837 197s 197s 198s 198s 199s 199s 378 QUARTERLY JOURNAL OF ECONOMICS
Poverty line Definition TABLE I POVERTY RATES AND HEADCOUNTS FOR VARIOUS POVERTY LINES Poverty rates 197 1975 198 1985 199 1995 2 197 2 $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) 197 1975 198 1985 199 1995 2 197 2 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) 533,861 536,379 498,32 399,527 362,92 327,943 321,518 212,343 $57 $1.5/Day 699,896 78,825 665,781 548,533 495,221 424,626 398,43 31,493 $73 $2/Day 1,28,532 1,52,761 1,8,789 874,115 798,945 671,69 6,275 428,257 $1,14 $3/Day 1,616,772 1,691,184 1,681,712 1,575,415 1,517,778 1,327,635 1,197,8 419,691 374 QUARTERLY JOURNAL OF ECONOMICS Poverty Rates are the percentages of citizens with incomes below the corresponding poverty line. Poverty head counts are constructed as the total number of people with incomes lower than the corresponding poverty line. The first poverty line (called WB poverty or 1$/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).
Fraction of World s poor in each region TABLE II (CONTINUED) 2 population 197 1975 198 1985 199 1995 2 197 2 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
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+
Quick+Video+ Hans+Rosling+:+From+6:25+ hlp://www.ted.com/talks/ hans_rosling_shows_the_best_stats_you_ve_ ever_seen.html+