Global Income Inequality: Trends, Drivers, and Measurement

Long-Term Growth Inequality: The Malthusian Trap

Global inequality is not just a difference between countries; it also exists within the same country. While disparities between nations have grown, inequality within individual countries has also risen. OECD nations tend toward equality, as described by the Kuznets Curve, which relates GDP (economic growth) to inequality (Gini coefficient). Modern economics suggests that inequality initially increases, reaches a peak, and then decreases. Reasons for this include:

• Initial GDP is used primarily for basic subsistence.
• Racial diversity.
• Colonial history.
• Migration as a primary solution.

Evolution of Inequality

During the second wave of globalization, human capital became more significant, and protectionism decreased.

Three Concepts of Global Inequality (Milanovic)

• Concept 1: One country, one person.
• Concept 2: Weight each country by its population.
• Concept 3: Inequality among all world inhabitants, regardless of location.

Measuring Global Income Inequality

To measure long-term global income inequality, the following data is required:

• Income per capita for each country (for concepts 1 and 2).
• Within-country inequality indices (for concept 3).

Main Aspects of Global Inequality Evolution (Baten et al.)

• Persistent Internal Inequality: With the exception of 20th-century "egalitarian revolutions" in rich countries.
• Rise of Between-Country Inequality (1820–1950): A massive increase occurred, causing the prominence of internal inequality to drop from 80% to 40% of total inequality.
• Recent Trends: A shift has occurred, characterized by a standstill or decrease in between-country inequality and an increase in internal inequality.

Lakner & Milanovic (2013)

Between 1988 and 2008, it is not entirely clear that global inequality has decreased. While between-country inequality has reduced its share, it remains the primary component of global inequality (77%), largely explained by the economic evolution of China and India.

HDI Inequality Trends

Inequality in the Human Development Index (HDI) has been decreasing since the early 20th century because life expectancy and literacy rates have natural limits. However, this improvement is still compatible with cases of divergence in recent years, particularly in Southern Africa.