Measuring the Evolution of Inequality in the Global Economy

Abstract

This chapter provides a summary of information in the UTIP data set on the evolution of industrial earnings inequality in the global economy. At this writing, the data set covers over seventy countries, with annual observations going back to 1972 in most cases and to 1963 in many. Our measure of changing inequality, based on the groupwise decomposition of the Theil statistic across industrial categories, appears to be a sensitive barometer of political and economic conditions in many countries, and the percentage change in this index appears to be meaningfully comparable across countries. Measurement of Inequality Around the World As the previous chapter made clear, the work of Deininger and Squire (1996a) has greatly advanced our knowledge of the state of research into income inequality around the world. By assembling a vast amount of past research, these authors have brought us as close as we are likely to get to having a comprehensive set of Gini and quintile estimates of the distribution of household or personal income across countries and through time. Yet, it is not enough to permit an authoritative examination of the effects of economic change on inequality in the world economy. Specifically, the effects of growth and globalization on wage inequality cannot be elucidated using these data, and, we argue, attempts to do so are likely to produce more perplexity than they are worth.