Measuring Global Inequality

Written on January 17, 2007 by Max Oliva in Development

J.Pozuelo-Monfort, MSc candidate in economic development at LSE.
Jaime PM.jpg One of the privileges and benefits of being a student at the London School of Economics is the possibility of hearing experts of such high caliber as Branko Milanovic, who today lectures on issues concerning inequality.
Dr Milanovic is Lead Economist of the Research Department at the World Bank headquartered in Washington DC, and a world authority on inequality measures. He has recently written a book titled ‘Worlds Apart’ (click here for more information in regards to Milanovic & Inequality).
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Dr Milanovic quotes: “In the world, depending how you decompose it, 2/3 of overall inequality is due to the differences in mean incomes of the countries. The differences between countries are contributing much more to inequality than the differences within countries. The poorest people in Germany are richer than 77% of the population in the world”.
Inequality is a hot topic. Its objective measure is vital to trace back investment in developing economies and funding of sustainable projects. Dr Milanovic with his knowledge and expertise contributes to the global debate of whether the world is witnessing an increase or decrease in the poverty gap between the world’s richest 20% and the bottom 80%.
A few more interesting points from Dr Milanovic’s presentation include some of the following:
• For each percentile level, Sri Lanka is better off than rural India.
• The richest people in Brazil are as rich as the richest in the developed country: this is a reflection of the world, and Brazil’s wealth distribution says a lot about how wealth is distributed on a worldwide basis.
• Only 17% of the population in OECD countries has seen its per-capita income decrease between 1980 and 2002. This figure contrasts with 33% in developing countries and 43% in Least Developing Countries.
• China and India are pulling global inequality down, but inequality between states in China and India are pushing global inequality up, and inequality between other poorer and richer countries is also pushing global inequality up.
• First to fourth world according to Dr Milanovic: Spain vs Morocco, Greece vs Albania.
• First to third world according to Dr Milanovic: United States vs Mexico.
• China is at the median world income.
In a global debate that questions whether globalization as a phenomenon is increasing or decreasing global inequality, Dr Milanovic’s work is fundamental vis a vis a major understanding of the income trends. His analysis does not only impact the World Bank’s policies, but should also touch the political class of the rich world, and sensitize the public administrators, so that they set up policies focused on reducing global inequality, be it measured by the Gini coefficient or otherwise.
For a more thorough discussion of some of these issues, as from our last post, CGD also recommends the work of Branko Milanovic (see, e.g., his figure on p 17 of this paper) and the 2005 WIDER Lecture by CGD president Nancy Birdsall, The World is not Flat: Inequality and Injustice in our Global Economy.


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