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1
World Income Distribution and Asian Economic Development: 1820-2003
The International Development Economics Associates (IDEAs)’ workshop on
"Development Experiences and Policy Options
for a Changing World”
3-5th June, 2007
Tsinghua University, Beijing, China
Ikemoto YukioInstitute of Oriental Culture
The University of Tokyo
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Contents
World income distribution: 1820 – 1990
World income distribution: 1990 – 2003
Interpretation
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World Income Distribution 1820-1996
KOKUBUN Keisuke, IKEMOTO Yukio and HAMASHIMA Atsuhiro, "Asian Economic Development in World Income Distribution: 1820-1996," The Memoirs of The Institute of Oriental Culture no.149, 2006.3, pp. 33-56.
http://repository.dl.itc.u-tokyo.ac.jp/ dspace/bitstream/2261/2314/1/ioc14909.pdf
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Assumption
Income inequality within country is neglected. This does not make any significant differences so long as only its trend matters.
National income is expressed in terms of PPP (purchasing power parity).
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Catch-up Process
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Kuznets’ Inverted U-shape
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Income Inequality in the World Income Distribution
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Gini coefficient, 1820 - 1990
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Catching-up: Western countries
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Catching-up: Asian countries
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Theil by region
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Decomposition of Theil Index
Theil Index = Between-region component
+ within-region component
Between-region component = Inequality which ignores inequality within each region
Within-region component = Sum of weighted regional inequality
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Decomposition of Theil: table
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Decomposition of Theil: graph
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Two effects of Asian growth
(1) Asian economies were catching up the Western countries, which decreased world income inequality.
(2) The catching-up process in Asia increased inequality in Asia.
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Conclusion: 1820 - 1990
World income inequality changed as Kuznets’ hypothesis predicted.
World income inequality decreased after the 1980s.
This was brought about by the catching-up process of Asian countries.
However, this, on the other hand, increased inequality among Asian countries.
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World Income Distribution1990-2003
This part is based on
Kurata Masamitsu, “Economic Analysis of Inequality: Reconsideration of Concepts and Estimation of World Income Inequality” March 2007.
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World income distribution, PPP, 1990 and 2003
World Income Distribution, , 1990 and 2003PPP
0
10
20
30
40
50
60
70
80
90
100
0 20 40 60 80 100
IndiaChina
India
China
2003
1990
Gini = 0.533
Gini = 0.587
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World Income Inequality
World income inequality decreased after 1990, mainly due to the rapid economic growth of China.
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Changes in Gini coefficientChanges in Gini coefficient
0.5
0.55
0.6
0.65
0.7
0.75
0.8
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
Exchange Rate
PPP
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World Income Distribution, 2003
World Income Distribution, 2003
0
10
20
30
40
50
60
70
80
90
100
0 20 40 60 80 100
Gini = 0.533
Gini = 0.739
PPP
Exchange Rate
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Gini coefficient by regionGini coefficinet by Region, PPP
0
0.1
0.2
0.3
0.4
0.5
0.619
90
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
World
Africa
Asia
Europe
North America
Oceania
South America
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Income distribution in AsiaIncome Distribution in Asia, PPP, 1990 and 2003
0
10
20
30
40
50
60
70
80
90
100
0 20 40 60 80 100
India, 1990
China2003
India, 2003China 1990
Gini = 0.364
Gini = 0.404
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Income Inequality in Asia
Income inequality in Asia also decreased mainly due to the rapid economic growth of China.
This means the Asian economies entered the equalizing phase of Kuznets’ inverted U-shape hypothesis.
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Conclusion: 1990 - 2003
World income inequality decreased very rapidly after 1990s.
This was brought about by the catching-up of Asian countries, especially China.
In this period, inequality within Asia also decreased very rapidly due to the rapid growth of China.
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So what?
Is the equalization of income distribution among countries good?
This does not tell us how people’s life changed. It just suggest the life may improved.
We need to know more about the life of people.
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Interpretation: Marxist view
Japanese exploited Asian people ….?
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Per capita income in Asia
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Income distribution in Asia
Table 2. Income Distribution in Asia
GDP, 2002 Population
(bil.US$) (%) (bil.PPP US$) (%) (Million) (%)
Japan 3,993.4 55.9 3,425.1 21.8 127.5 3.8
Hong Kong 161.5 2.3 182.6 1.2 7.0 0.2
Singapore 87.0 1.2 100.1 0.6 4.2 0.1
South Korea 476.7 6.7 807.3 5.1 47.4 1.4
Malaysia 94.9 1.3 221.7 1.4 24.0 0.7
Thailand 126.9 1.8 431.9 2.8 62.2 1.9
China 1,266.1 17.7 5,860.9 37.3 1294.9 38.6
Philippines 78.0 1.1 333.5 2.1 78.6 2.3
Indonesia 172.9 2.4 682.9 4.4 217.1 6.5
India 510.2 7.1 2,799.6 17.8 1049.5 31.3
Viet Nam 35.1 0.5 185.4 1.2 80.3 2.4
Laos 1.7 0.0 9.5 0.1 5.5 0.2
Total (incl. others) 7,141.1 100.0 15,694.7 100.0 3,357.4 100.0
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Japanese should work harder? Now Japan is no longer the biggest
economy in Asia in terms of PPP. A student commented, “Japanese
should work harder to recover the No.1 position.”
I ask her “What does it mean for Japanese people’s life?”
We are not working for our country to be No.1.
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Neo-classical view Japanese are rich because they are
more productive. Some people misunderstand this as if
it shows “superiority” of Japanese people.
This is “Rational Fool” (Amartya Sen) who cannot distinguish between different concepts; richness and superiority.
Japan has its own problems.
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Increasing Income Inequality in Japan
0.3
0.32
0.34
0.36
0.38
0.4
0.42
0.44
0.46
1960 1970 1980 1990 2000
Original income Disposable income
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Increasing Suicide Rate in Japan
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HappinessQ5 O. LEISURE > VERY/PRETTY HAPPY
Total Gender Age Education
% Male Fem -30.0 30-39 40 +
Japan 39.1 34.6 43.0 37.0 36.2 41.2
South Korea 33.5 34.6 32.3 38.1 30.8 32.2
China 48.2 46.1 50.4 51.1 49.6 46.1
Malaysia 86.6 86.6 86.7 87.4 85.6 86.8
Thailand 69.5 70.4 68.7 70.7 69.6 68.6
Vietnam 39.0 39.7 38.3 45.1 34.5 36.4
Myanmar 71.2 70.0 72.4 74.5 67.2 71.4
India 85.7 82.7 89.1 82.9 89.2 85.6
Sri Lanka 80.7 77.9 83.6 79.5 82.0 80.8
Uzbekistan 49.4 53.6 45.8 58.9 43.0 45.4
Total 60.3 59.9 60.7 64.3 58.7 58.6
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Evaluation of Inequality
Income may not be a good indicator of people’s life.
Income inequality may not indicate inequality of life.
Quality of Life (QOL) Human Development Indicator
(UNDP) Capability Approach by Amartya Sen
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References
(1) Amartya Sen, Inequality Reexamined, 1992.
This book insists to consider inequality in terms of capability rather than income because income is an inappropriate indicator of human well-being. This applies to poverty.
(2) Wilkinson, The Impact of Inequality, 2006.
This book analyzes the impact of inequality on health. In more unequal society, people suffer health problems more.
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Thank
you!