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Market Research: Is Global Inequality Rising?

Subject: International
Author: François Bourguignon and Christian Morrisson, in The American Economic
Review (Sept. 2002)
Source: Wilson Quarterly, Spring 2003

From 1820 to 1950 global economic inequality in­creased almost continuously, though the pace slowed after World War I. Social scientists use something called the Gini coefficient to measure inequality; a Gini coefficient of 1.0 represents maximum inequality. The world’s Gini coefficient grew from 0.5 in 1820 to 0.61 in 1914, and to 0.64 in 1950. By 1992, it had reached 0.657.

Rising global inequality after 1820 did not mean that the poor were getting poorer. On the contrary, say Bourguignon and Morris­son, “the extreme poverty headcount fell from 84 percent of the world population in 1820 to 24 percent in 1992.” The rich simply got richer faster.


The authors’ biggest innovation comes in identifying the sources of inequality. In 1820, within-country inequality accounted for 80 percent of the world’s inequality. In other words, there wasn’t a great rich-poor disparity among countries, but there was within each country. By 1950, however, within-country inequality accounted for only 40 percent of the global total.


What happened? Through 1950, the “dominant” drag on equalization was Asia’s slow economic growth, particularly in China and India, the two demographic giants.

Remarkably, there doesn’t seem to be much connection between population growth and global inequality. One reason is that the relative size of regional populations hasn’t changed that much.

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posted by Victor Lloyd Smith @ 12:44 PM