Accounting for the Recent Decline in Global Income Inequality

Abstract

Following nearly two centuries of growth, global income inequality declined in the last decades of the 20th century. To determine the causes of that historic decline, we focus on income inequality across nations and find that the major equalizing force is faster‐than‐world‐average income growth in China and South Asia, industrializing regions where 40% of the world’s people live. Apparently what matters most about economic globalization thus far is its role in the spread of industrialization throughout populous poor regions of the world. If so, then globalization most likely has reduced global income inequality. This decline is anticipated to continue over the next few decades, first, because of the continued industrialization of poor regions and, second, because most of the growth in the world’s working‐age population will occur in poor regions.