Intercountry Income Inequality: World Levels and Decomposition Between and Within Developmental Clusters and Regions

Abstract

By applying the Theil index of income inequality and its decomposition between and within groups to income data adjusted for purchasing power parity on 115 countries between 1960 and 1985, we find that the worldwide level of intercountry income inequality declined steadily by 0.584% per annum, indicating a considerable overall convergence process. The decomposition analysis indicates that the dominant constituent of intercountry income inequality was the aggregate inequality among regions, followed by the aggregate inequality within regions. The decomposition also reveals that the contribution of income inequality among the clusters of LDCs, OECD countries and CPEs was very small.