The three eras of global inequality, 1820–2020 with the focus on the past thirty years

Abstract

The paper reestimates global inequality between 1820 and 1980, reappraises the results up to 2013, and presents new inequality estimates for 2018. It shows that historically, global inequality has followed three eras: the first, from 1820 until 1950, characterized by rising income differences both between and within countries; the second, from 1950 to the last decade of the 20th century, with very high global and between-country inequality; and the current one of decreasing inequality thanks to the rise of Asian incomes, and especially so Chinese. The present era has seen the emergence of the global “median” class (people with per capita annual incomes ranging between $PPP 3,000 and $PPP 5,000) and the greatest reshuffling in income positions between the West and China since the Industrial Revolution. Absolute income differences in the past 30 years have however increased, and the income gap between the “core” and the poor “periphery” (if China is excluded) remains large: the ratio between median income in the core and periphery in 2018 exceeds 8 to 1 in PPP terms, and 22 to 1 in nominal dollars. The evolution of global inequality in the future will much more depend on what happens to the growth rates and inequality in India and large African countries than on China, as well as on the negative impact of climate change.