Using social tables, the author makes an estimate of global inequality (inequality among world citizens) in the early 19th century. The analysis shows that the level and composition of global inequality have changed over the past two centuries. The level has increased, reaching a high plateau around the 1950s, and the main determinants of global inequality have become differences in mean country incomes rather than inequalities within nations. The inequality extraction ratio (the percentage of total inequality that was extracted by global elites) has remained surprisingly stable, at around 70 percent of the maximum global Gini, during the past 100 years.

The present study uses the GIDD, a CGE-microsimulation model for Global Income Distribution Dynamics, to understand the ex-ante dynamics of global income distribution. Three main robust results emerge. First, under a set of realistic assumptions, there will be a reduction in global income inequality by 2030. This potential reduction can be fully accounted for by the projected convergence in average incomes across countries, with poor and populous countries growing faster than the rest of the world. Second, this convergence process will be accompanied by a widening of income distribution in two-thirds of the developing countries; the main cause being increasing skill premia. Third, a trend that may counter-balance the potential anti-globalization sentiment is the emergence of a global middle class: a group of consumers who demand access to, and have the means to purchase, international goods and services. The results show that the share of these consumers in the global population is likely to more than double in the next 20 years. These ex-ante trends in global income distribution suggest that the mid-1990s could be seen as a turning point after which global inequality began showing a negative tendency.

There is a general consensus that most of the poor in developing countries are net food buyers and food price increases are bad for the poor. This could be expected of urban poor, but it is also often attributed to the rural poor. Recent food price increases have increased the importance of this issue, and the possible policy responses to these price increases. This paper examines the characteristics of net food sellers and buyers in nine low-income countries. Although the largest share of poor households are found to be net food buyers, almost 50 percent of net food buyers are marginal net food buyers who would not be significantly affected by food price increases. Only three of the nine countries examined exhibited a substantial proportion of vulnerable households. The average incomes (as measured by expenditure) of net food buyers were found to be higher than net food sellers in eight of the nine countries examined. Thus, food price increases, ceteris paribus, would transfer income from generally higher income net food buyers to poorer net food sellers. The analysis also finds that the occupations and income sources of net sellers and buyers in rural areas are significantly different. In rural areas where food production is the main activity and where there are limited non-food activities...

Is inequality largely the result of the Industrial Revolution? Or, were pre-industrial incomes and life expectancies as unequal as they are today? For want of sufficient data, these questions have not yet been answered. This paper infers inequality for 14 ancient, pre-industrial societies using what are known as social tables, stretching from the Roman Empire 14 AD, to Byzantium in 1000, to England in 1688, to Nueva España around 1790, to China in 1880 and to British India in 1947. It applies two new concepts in making those assessments - what the authors call the inequality possibility frontier and the inequality extraction ratio. Rather than simply offering measures of actual inequality, the authors compare the latter with the maximum feasible inequality (or surplus) that could have been extracted by the elite. The results, especially when compared with modern poor countries, give new insights in to the connection between inequality and economic development in the very long run.

This paper extends the Inequality Possibility Frontier approach in two methodological directions. It allows the social minimum to increase with the average income of a society, and it derives all the Inequality Possibility Frontier statistics for two other inequality measures besides the Gini. Finally, it applies the framework to contemporary data, showing that the inequality extraction ratio can be used in the empirical analysis of post-1960 civil conflict around the world. The duration of conflict and the casualty rate are positively associated with the inequality extraction ratio, that is, with the extent to which elite pushes the actual inequality closer to its maximum level. Inequality, albeit slightly reformulated, is thus shown to play a role in explaining civil conflict.

This paper assembles data at the all-India level and for the village of Palanpur, Uttar Pradesh, to document the growing importance, and influence, of the non-farm sector in the rural economy between the early 1980s and late 2000s. The suggestion from the combined National Sample Survey and Palanpur data is of a slow process of non-farm diversification, whose distributional incidence, on the margin, is increasingly pro-poor. The village-level analysis documents that the non-farm sector is not only increasing incomes and reducing poverty, but appears as well to be breaking down long-standing barriers to mobility among the poorest segments of rural society. Efforts by the government of India to accelerate the process of diversification could thus yield significant returns in terms of declining poverty and increased income mobility. The evidence from Palanpur also shows, however, that at the village-level a significant increase in income inequality has accompanied diversification away from the farm. A growing literature argues that such a rise in inequality could affect the fabric of village society...

Inequalities in health have recently started to receive a good deal of attention in the developing world. But how large are they? An how large are the differences across countries? Recent data from a 42-country study, show large, but varying inequalities in health across countries. The author explores the reasons for these inter-country differences, and concludes that large inequalities in health, are not apparently associated with large inequalities in income, or with small shares of publicly financed health spending. But they are associated with higher per capita incomes. Evidence from trends in health inequalities - in both the developing, and the industrial world - supports the notion that health inequalities rise with rising per capita incomes. The association between health inequalities, and per capita incomes is probably due in part, to technological change going hand-in-hand with economic growth, coupled with a tendency for the better-off to assimilate new technology ahead of the poor. Since increased health inequalities...

Growth is pro-poor if the poverty measure of interest falls. According to this definition there are three potential sources of pro-poor growth: (1) a high rate of growth of average incomes; (2) a high sensitivity of poverty to growth in average incomes; and (3) a poverty-reducing pattern of growth in relative incomes. The author empirically decomposes changes in poverty in a large sample of developing countries during the 1980s and 1990s into these three components. In the medium to long run, most of the variation in changes in poverty can be attributed to growth in average incomes, suggesting that policies and institutions that promote broad-based growth should be central to the pro-poor growth agenda. Most of the remainder of the variation in poverty is due to poverty-reducing patterns of growth in relative incomes, rather than differences in the sensitivity of poverty to growth in average incomes. Cross-country evidence provides relatively little guidance as to the policies and institutions that promote these other sources of pro-poor growth.

Incomes in the poorest two quintiles on average increase at the same rate as overall average incomes. This is because, in a global dataset spanning 118 countries over the past four decades, changes in the share of income of the poorest quintiles are generally small and uncorrelated with changes in average income. The variation in changes in quintile shares is also small relative to the variation in growth in average incomes, implying that the latter accounts for most of the variation in income growth in the poorest quintiles. These findings hold across most regions and time periods and when conditioning on a variety of country-level factors that may matter for growth and inequality changes. This evidence confirms the central importance of economic growth for poverty reduction and illustrates the difficulty of identifying specific macroeconomic policies that are significantly associated with the relative growth rates of those in the poorest quintiles.

This article presents data on the evolution of top incomes and wages for 1922-2000 in India using individual tax return data. The data show that the shares of the top 0.01 percent, 0.1 percent, and 1 percent in total income shrank substantially from the 1950s to the early to mid-1980s but then rose again, so that today these shares are only slightly below what they were in the 1920s and 1930s. This U-shaped pattern is broadly consistent with the evolution of economic policy in India: from the 1950s to the early to mid-1980s was a period of 'socialist' policies in India, whereas the subsequent period, starting with the rise of Rajiv Gandhi, saw a gradual shift toward more pro-business policies. Although the initial share of the top income group was small, the fact that the rich were getting richer had a nontrivial impact on the overall income distribution. Although the impact is not large enough to fully explain the gap observed during the 1990s between average consumption growths shown in National Sample Survey based data and the national accounts based data...

New data derived directly from household surveys are used to examine the effects of globalization on income distribution in poor and rich countries. The article looks at the impact of openness and of direct foreign investment on relative income shares across the entire income distribution. It finds strong evidence that at low average income levels, the income share of the poor is smaller in countries that are more open to trade. As national income levels rise, the incomes of the poor and the middle class rise relative to the income of the rich. The article explains why using the trade to gross domestic product (GDP) ratio in purchasing power parity terms, as favored by some analysts, is inappropriate in studies of the effect of trade on income distribution.

The paper presents a newly compiled and improved database of national household surveys between 1988 and 2008. In 2008, the global Gini index is around 70.5 percent having declined by approximately 2 Gini points over this twenty year period. When it is adjusted for the likely under-reporting of top incomes in surveys by using the gap between national accounts consumption and survey means in combination with a Pareto-type imputation of the upper tail, the estimate is a much higher global Gini of almost 76 percent. With such an adjustment the downward trend in the Gini almost disappears. Tracking the evolution of individual country-deciles shows the underlying elements that drive the changes in the global distribution: China has graduated from the bottom ranks, modifying the overall shape of the global income distribution in the process and creating an important global "median" class that has transformed a twin-peaked 1988 global distribution into an almost single-peaked one now. The "winners" were country-deciles that in 1988 were around the median of the global income distribution...

The Dominican Republic has low economic mobility, with less than 2 percent of its people climbing to a higher income group during the decade, compared to an average 41 percent in the Latin America and Caribbean region as a whole. Despite improving access to basic goods and services such as water and education, coverage and quality remain uneven, thus limiting the economic opportunities of many disadvantaged people. This reflects their inability to influence the system to their benefit, a manifestation of weak political agency. This report uses a comprehensive definition of "equity" which entails that citizens must have equal access to opportunities, be able to live in dignity, and have the autonomy and voice to participate fully in their communities and decide on life plans that they have reason to value. This report identifies three broad goals for addressing the underlying causes of economic inequity in the Dominican Republic: (1) promote equitable, efficient, and sustainable fiscal policy; (2) build fair, transparent...

By the widely used difference-in-difference method, the Southwest China Poverty Reduction Project had little impact on the proportion of people in beneficiary villages consuming less than $1 a day-despite a public outlay of $400 million. Is that right, or is the true impact being hidden somehow? The authors find that impact estimates are quite sensitive to the choice of outcome indicator, the poverty line, and the matching method. There are larger poverty impacts at lower poverty lines. And there are much larger impacts on incomes than consumptions. Uncertainty about the impact probably made it hard for participants to infer the gain in permanent income, so they saved a high proportion of the short-term gain.

When average income rises, the average incomes of the poorest fifth of society rise proportionately. This is a consequence of the strong empirical regularity that the share of income accruing to the bottom quintile does not vary systematically with average income. The authors document this empirical regularity in a sample of 92 countries spanning the past four decades and show that it holds across regions, periods, income levels, and growth rates. The authors next ask whether the factors that explain cross-country differences in the growth rates of average incomes have differential effects on the poorest fifth of society. They find that several determinants of growth--such as good rule of law, opennness to international trade, and developed financial markets--have little systematic effect on the share of income that accrues to the bottom quintile. Consequently, these factors benefit the poorest fifth of society as much as everyone else. Thee is some weak evidence that stabilization from high inflation and reductions in the overall size of government not only increase growth but also increase the income share of the poorest fifth in society. Finally...

Social welfare functions that assign weights to individuals based on their income levels can be used to document the relative importance of growth and inequality changes for changes in social welfare. In a large panel of industrial and developing countries over the past 40 years, most of the cross-country and over-time variation in changes in social welfare is due to changes in average incomes. In contrast, the changes in inequality observed during this period are on average much smaller than changes in average incomes, are uncorrelated with changes in average incomes, and have contributed relatively little to changes in social welfare.

Aid is good for the poor. This paper uses detailed aid data spanning 60 developing countries over the past two decades to show that social aid significantly and directly benefits the poorest in society, while economic aid increases the income of the poor through growth. This new and unequivocal finding distinguishes the current study from past studies that only utilized aggregate aid data and returned ambiguous results. The paper also confirms that none of the elements of globalization (trade, foreign direct investment, remittances), policies (government expenditure, inflation management), institutional quality, nor other plausibly pro-poor factors have systematic effects on the poor or any other income group, beyond their effects on average incomes. The paper finds that trade and foreign direct investment tend to benefit the richest segments of society more than other income groups. Therefore, the presented evidence suggests that aid can play a crucial role in enabling the poor to benefit more from globalization. These discoveries underscore the need to assist developing countries to find the mix of economic and social aid that jointly promotes the participation of the poor in the development process under globalization. In this manner...

The Middle East and North Africa (MENA) region has made steady progress in terms of the World Bank's twin goals of eliminating extreme poverty and boosting shared prosperity. During the 2000s, the percentage of people living on less than $1.25 a day declined in all regional economies, except Yemen, and in 2010 was low on average. The incomes of the bottom 40 percent have been growing at higher rates than average incomes in almost all MENA countries. In fact, in terms of the income growth among the bottom 40 percent, the MENA region has done better than most other regions, except Latin America and the Caribbean. Income inequality has not worsened and has been low by international standards. Two things must be done to boost real shared prosperity in the MENA. First, leveling the playing field is a priority because everyone must have a fair opportunity for success. Regulations should not favor the privileged. Second, citizens should hold the state accountable, rather than the other way around. By collecting information and sharing it with the public...

This book is a collection of essays that seeks to answer three interrelated sets of questions about Africa's recent growth recovery. The first set of essays addresses questions about the drivers and durability of Africa's growth. How different is current economic performance compared to Africa's long history of boom-bust cycles? Have African countries learned to avoid past mistakes and pursued the right policies? How much of the current performance depends on good luck such as favorable commodity prices or the recovery of external assistance and how much depends on hard-won economic policy reforms. A second set of essays looks at the role of donor flows. External assistance plays a larger role in Africa's growth story than in any other part of the developing world. As a result, the economic management of external assistance is a major public policy challenge, and donor behavior is a significant source of external risk. The third set of essays looks at questions arising from commodity price shocks especially from changes in the price of oil. Relative to factors such as policy failures...

Over the past 20 years, aggregate measures of global inequality have changed little even if significant structural changes have been observed. High growth rates of China and India lifted millions out of poverty, while the stagnation in many African countries caused them to fall behind. Using the World Bank's LINKAGE global general equilibrium model and the newly developed Global Income Distribution Dynamics (GIDD) tool, this paper assesses the distribution and poverty effects of a scenario where these trends continue in the future. Even by anticipating a deceleration, growth in China and India is a key force behind the expected convergence of per-capita incomes at the global level. Millions of Chinese and Indian consumers will enter into a rapidly emerging global middle class-a group of people who can afford, and demand access to, the standards of living previously reserved mainly for the residents of developed countries. Notwithstanding these positive developments, fast growth is often characterized by high urbanization and growing demand for skills...