Edited by David Deese
Chapter 3: Trade, development, and inequality
Inequality can be considered for any well-defined group for which data is available. One can feel unequal to a neighbour, or at an opposite extreme one may be concerned with inequality for the world population as a whole. Someone who claims to feel the pain of inequality in the second case as acutely as for the first may not be honest. Be that as it may be, all inequalities are proper concerns for economic analysis. The estimation of global inequality is an undertaking only embarked upon by the brave, or perhaps the foolhardy. Sala-i-Martin and Pinkovskiy (2009) tell us that the world Gini coefficient has declined from about 0.68 in the early 1970s to about 0.61 in 2006. These authors explain in detail how such an estimate is arrived at, with missing data being estimated by interpolation. While the exact numerical values proposed may not be worth much, the picture painted is surely correct. World inequality has been declining for the last several decades. The extraordinary nature of this development should not pass without notice. Ever since the industrial revolution, rich countries have typically grown faster than poor countries. What has altered recently has been the rapid growth of incomes in populous and previously poor countries. The rapid growth of incomes in poor countries that accounts for the declining world Gini coefficient is consistent with growing inequality within individual countries or regions, whether rich or poor.
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