Worlds Apart Center for Economic and Policy Research Fundación Sistema Washington, April 7 2006...
Transcript of Worlds Apart Center for Economic and Policy Research Fundación Sistema Washington, April 7 2006...
Worlds Apart
Center for Economic and Policy Research
Fundación Sistema
Washington, April 7 2006
1. Inequality between countries
2. Global inequality (a sketch)
1. Inequality between countries(Concept 1 inequality)
Three concepts of inequality definedConcept 1 inequality
Concept 2 inequality
Concept 3 (global) inequalty
Inequality, 1950-2000:The mother of all inequality disputes
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Year
Gin
i Ind
ex
World unweighted World population-weighted World weighted except China
Global Inequality
Concept 1 inequality
Concept 2 inequality
Inequality between countries: Discontinuity in development trends around
1978-80• The watershed years (Bairoch)
• Tripling of oil prices
• Increase in real interest rates (from –1% to +5% in the USA and the world)
• Debt crisis
• China’s responsibility system introduced
• Latin American begins its “lost decade”, E. Europe/USSR “stagnate”
The outcome:
• Middle income countries declined (Latin America, EEurope/former USSR)
• China and India pulled ahead
• Africa’s position deteriorated further
• Developed world pulled ahead
• World growth rate decreased by about 1 % (compared to the 1960-78 period)
Different way to look at world growth rates
1960-1980 1980-2000
Unweighted (each country counts the same)
2.9 0.8
Percentage negative 23 33
China 2.7 8.2
India 1.2 3.6
Population-weighted 3.0 3.2
World (plutocratic ROG) 2.6 1.6
Annual per capita growth rates 1980-2002Mean Median Percentage
negative
“Old OECD” 1.9 2.0 17
Middle income countries
1.0 1.8 33
LLDC 0.1 0.8 43
Assessment
• World income growth slowed down by 1 percentage point per capita p.a.
• Poor and populous countries grew much faster and average (population-weighted) growth rate even increased
• Countries’ growth record became much more diverse—and systematically so…Divergence
Growth over 1980-2002 period as function of initial (1980) income
Growth rate by each decile of countries, 1960-78 and 1978-2000
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1.0
2.0
3.0
4.0
5.0
1 2 3 4 5 6 7 8 9 10
Decile (in the initial year, 1960 or 1978)
Ave
rag
e g
row
th r
ate
per
cap
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p.a
.
Between 1978 and 2000
Between 1960 and 1978
Deciles formed according to initial (1960 or 1978 income level)
Define four worlds:
• First World: The West and its offshoots• Take the poorest country of the First World
(e.g. Portugal)• Second world (the contenders): all those
less than 1/3 poorer than Portugal.• Third world: all those 1/3 and 2/3 of the
poorest rich country.• Fourth world: more than 2/3 below
Portugal.
Four Worlds 1960
Four Worlds 2003
Four worlds in 1960 and 20031960 2003
Number of countries
% of population
Number of countries
% of population
First 41 26 27 16
Second 22 12 7 2
Third 39 13 29 37
Fourth 25 49 72 46
The key borders today
• First to fourth world: Greece vs. Macedonia and Albania; Spain vs. Morocco (25km); Singapore vs. Indonesia
• First to third world: US vs. Mexico;
Germany vs. Poland; Austria vs. Hungary
In 1960, the only key borders were Argentina and Uruguay (first) vs. Brazil, Paraguay and Bolivia (third world), and Australia (first) vs. Indonesia (fourth)
Approximate % of foreign workers in labor force
Ratio in per capita GDIs (in PPP terms)
Greece (Albanians)
7.5 4 to 1
Spain (Moroccans)
12.0 4.5 to 1
United States (Mexicans)
>10.0 4.3 to 1
Austria (former Yugoslavs)
10.0 2.7 to 1
Malaysia
(Indonesians)
>10.0 5.3 to 1
Parts of Africa where 2000 GDI per capita is less than in 1963 (180m people )
Poorer than during J.F. Kennedy
US GDI per capita in the meantime doubled
2. Inequality between world citizens today
What is a Gini of 64-66; how big is it?
Top Bottom Ratio
In $PPP: 5% 33% 0.2% 165-1
10% 50% 0.7% 70-1
In US$: 5% 45% 0.15% 300-1
10% 67.5% 0.45% 150-1
5 top countries 31,850 580 55-1
10 top countries
28,066 660 42-1
First order dominance (year 1998) expressed in terms of percentile of world income distribution
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4060
8010
0Y
98_c
1 5 9 13 17 20# of distribution groups
France
Kazak
Brazil
Sri Lanka
India-R
twoway (line Y98_c group if year==1998 & contcod=="BRA") (line Y98_c group if year==1998 & contcod=="IDN-R") (line Y98_c group if year==1998 & contcod=="FRA") (line Y98_c group if year==1998 & contcod=="LKA"), legend(off) xtitle(country ventile) ytitle(percentile of world income distribution)
Same income for the top, different incomes for all the others
Hungary
Ukraine
Peru
20
40
60
80
10
0p
erc
en
tile
of
wo
rld
inco
me
dis
trib
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0 5 10 15 20country ventile
Poor and rich people and countries, 1998
People
Countries
Poor Middle income
Rich Total
Poor 3879 210 96 4185
Middle 189 35 52 277
Rich 92 115 707 913
Total 4160 360 855 5375
Conclusion: “The age of inequality”?
Inequalities between countries have increased
Population weighted inequality between countries went down thanks to fast growth in China and India (Caveat: acc. to Maddison it is almost stable + R/U differences in China and India have global implications)
Inequality among people in the world is very high (Gini between 62 and 66) but its direction of change is not clear
Within-country inequalities have increased in many countries including in the largest (US, UK, China, India, Russia)
• Book “Worlds Apart: Measuring International and Global Inequality”
• Email: [email protected]
• Website: http://econ.worldbank.org/projects/inequality