Abstract
The issue of world income inequality has been debated widely in the literature. At issue is whether inequality has, on the whole, been increasing or decreasing over time. I reexamine results from Firebaughs (1999) seminal article on demographic e?ects on inequality, in which he found a 30-year plateau of world income inequality when countries are weighted based on their populations. In contrast, I show that the increasing integration of market economies over the past decades has been re?ected in dramatically increasing international inequality. Inequality as currently measured, however, may bear little resemblance to a naive under-standing of the term. I conclude with some preliminary ?gures from an alternate characterization of convergence and divergence, based on world-systems categories.
Highlights
Along tradition of theoretical work in the economics literature on economic growth predicts the convergence of poorer with richer economies, as a result of capital movements from areas of relatively high capital utilization to those where capital intensity is relatively lower
World income inequality cannot be decomposed as Firebaugh suggests
Nations’ International Comparisons Program. (See Summers and Heston 1991 for a summary of the Penn World Table (PWT) methodology; see Ahmad 1994 for a description of the UN ICP.) In contrast to the System of National Accounts (SNA) method, PWT real gross domestic product is estimated in a top-down fashion, beginning from final consumption and working towards implied output
Summary
Along tradition of theoretical work in the economics literature on economic growth predicts the convergence of poorer with richer economies, as a result of capital movements from areas of relatively high capital utilization to those where capital intensity is relatively lower. The new countries of the south were expected to grow rapidly in the decades following formal political independence This growth did not materialize, and a sociological critique emerged that capital transfers, far from promoting convergence in income between rich and poor countries, might actual promote and perpetuate divergence. Population and Sample Selection Effects measures of inequality chosen to be studied Both agree with the other camp’s empirical results, once the choice of operationalization has been determined. Firebaugh broke new ground on several fronts: through methodological advances in the handling of exchange rates, through his ANOVA metaphor for studying cross-country inequality, and, most importantly, through his specification of a demographic theory of world income convergence. While the first two areas are mainly of interest to specialists in the field, the third is of general importance for all social scientists and policy-makers working in the global arena, and will receive special attention
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