The world distribution of income: evolution over the recent period and effects of population growth

Abstract

This paper examines the impact of economic and demographic factors on the evolution of world income distribution from 1950-86. The authors consider their work to be preliminary since it does not yet include information on socialist countries. The paper first analyzes the changes in the world distribution of Gross National Product (GNP) and consumption and then considers the effects of population growth on world inequality. For data on population GNP and consumption the authors rely on the 1980 World Tables the World Development Report and the World Bank Atlas. The authors find that over the last decade world distribution of income among nonsocialist countries has not improved. GNP and consumption figures both indicate that world inequality was substantially higher in 1986 than it has been 25 or 35 years earlier. The authors attribute the increasing inequality to the fact that poor countries have been unable to recover from negative economic shocks. While economic factors reveal a definite worsening trend the authors find that the role of population growth on the world distribution of income is not clear. When the elasticity of national income with respect to population is assumed to be close to unity population growth turns out to have an ambiguous effect on the level of world inequality. But when the elasticity is assumed to be between 0 and 0.5 population growth as a substantial negative effect on world income distribution. Though conclusions on the world distribution income depend on assumptions about the relationship between population and economic growth the paper suggests that a small enough GNP elasticity and a deceleration of population growth could lead to an improvement in world income distribution.