IPD AI

Evolution of the Global Distribution of Income in 1970-99

08/01/2001
Network Papers

This paper attempts to reconstruct the complex nature of global income distribution duringthe later part of the 20th century. The primary concern is to demonstrate both the structure of global income distribution and its regional composition and to depict the changing extent of this distribution over time. A new technique for distributional analysis [quasi-exact interpolation] is employed.

This allows for an analysis based on the so-called “true” world distribution concept, i.e., taking into consideration both between-country and within-country inequalities, and thus, measuring the inequality between persons across the whole world. The results show that the global distribution has clearly twin peaks: one concentrating around China, India and Africa; and another, around the OECD. Over the 29 year period, 1970-1999, while acute absolute poverty declined from 1.4 bln. to 1.2 bln., global income inequality increased from 0.822 to 0.907 as measured by the Theil index, and from 0.668 to 0.683 as measured by the Gini. Moreover, under a broader definition of poverty, the poor count increased from 2.0 bln. to 2.5 bln. While the inequality grew during 1970-90 as measured by both Gini and Theil indexes, in the 90s its development become more complex, which is reflected in rising Theil and simultaneously declining Gini. This provides evidence for the now widely accepted belief that growth, per se, is not the panacea for poverty reduction. The quality and type of growth matters.