Global Inequality: Relatively Lower, Absolutely Higher

Miguel Niño‐Zarazúa,Finn Tarp,Laurence Roope

doi:10.1111/roiw.12240

Abstract

AbstractThis paper measures trends in global interpersonal inequality during 1975–2010 using data from the most recent version of the World Income Inequality Database (WIID). The picture that emerges using ‘absolute,’ and even ‘centrist’ measures of inequality, is very different from the results obtained using standard ‘relative’ inequality measures such as the Gini coefficient or Coefficient of Variation. Relative global inequality has declined substantially over the decades. In contrast, ‘absolute’ inequality, as captured by the Standard Deviation and Absolute Gini, has increased considerably and unabated. Like these ‘absolute’ measures, our ‘centrist’ inequality indicators, the Krtscha measure and an intermediate Gini, also register a pronounced increase in global inequality, albeit, in the case of the latter, with a decline during 2005 to 2010. A critical question posed by our findings is whether increased levels of inequality according to absolute and centrist measures are inevitable at today's per capita income levels. Our analysis suggests that it is not possible for absolute inequality to return to 1975 levels without further convergence in mean incomes among countries. Inequality, as captured by centrist measures such as the Krtscha, could return to 1975 levels, at today's domestic and global per capita income levels, but this would require quite dramatic structural reforms to reduce domestic inequality levels in most countries.

Highlights

Since the turn of the century, inequality has become one of the most prominent political issues of our time
The results indicate that relative global inequality fell during 1975 to 2010, from 0.739 to 0.631 according to the Gini coefficient, and from 1.899 to 1.650 according to the Coefficient of Variation
Global inequality increased substantially according to the two centrist measures; from 19,342 to 28,902 according to the Krtscha, and from 2,931 to 4,232 according to our Intermediate Gini

Summary

Introduction

Since the turn of the century, inequality has become one of the most prominent political issues of our time. Issues of taxation and redistribution were central to the debate in the 2012 US presidential election and in a number of recent general elections in Europe. There has recently been significant interest in the economic literature in the level of, and trends in, various concepts of global inequality. The earliest of these papers were predominantly focused on either within-country inequality, as in Cornia and Kiiski (2001), or between-country inequality (see, for example, Firebaugh, 1999, 2003, Melchior, Telle and Wiig, 2000). Much of the impetus for these studies came from concerns as to what impact the recent era of globalization may have had on inequality (see for example, Richardson, 1995, Wood, 1995, Williamson, 1999, and UNDP, 1999, which explicitly called for policies to mitigate rising inequality caused by economic globalization)

Objectives

Results

Conclusion