Global Income Inequality in Numbers: in History and Now
| Published date | 01 May 2013 |
| DOI | http://doi.org/10.1111/1758-5899.12032 |
| Author | Branko Milanovic |
| Date | 01 May 2013 |
Global Income Inequality in Numbers: in
History and Now
1
Branko Milanovic
World Bank
Abstract
This article presents an overview of calculations of global inequality, recently and over the long term, and outlines the
main controversies and political and philosophical implications of the findings. It focuses in particular on the winners
and losers of the most recent episode of globalization, from 1988 to 2008. It suggests that the period has witnessed
the first decline in inequality between world citizens since the Industrial Revolution. However, the decline can be sus-
tained only if countries’mean incomes continue to converge (as they have been doing during the past ten years) and
if internal (within-country) inequalities, which are already high, are kept in check. Mean-income convergence would
also reduce the huge ‘citizenship premium’that is enjoyed today by the citizens of rich countries.
When we think of income inequality, our first reaction is
to think of it within the borders of a country. This is
quite understandable in a world where the nation state
is very important in determining one’s income level and
access to a number of benefits (from pensions to free
health care), and where by far the dominant way in
which political life is organized is at the level of a coun-
try. However, in the era of globalization another way to
look at inequality between individuals is to go beyond
the confines of a nation state and to look at inequality
between all individuals in the world. Once we do so,
many of the things about inequalities in general that we
believe or think we know change; it is like going from a
two-dimensional world to a three-dimensional one.
As the world becomes more integrated, the global
dimension of inequality is likely to become increasingly
relevant. This is for at least two reasons: the much-
increased movement of factors of production across
borders, and the greater influence of other people’s (for-
eigners’) standard of living and way of life on one’s per-
ceived income position and aspirations. Greater
movement of capital, goods, technology and ideas from
one side of the globe to another implies greater connec-
tivity with people who are not one’s compatriots, and
greater dependence on other nations for the generation
of one’s income. Movements of labor that illustrate this
interdependence in a most obvious fashion are still less
important than movements of capital, but they are
increasing. The knowledge of how other people live and
how much money they make influences strongly our
perception of our own income and position in the
income pyramid. An imaginary community of world citi-
zens is thus built gradually. And once this is done, com-
parisons of actual incomes and welfare between different
members of that imaginary community acquire impor-
tance. This is why global inequality will gain in impor-
tance, even if it is not as relevant or important for an
average individual as inequality within his or her political
community (nation state). Once we compare ourselves
with people from other parts of the world, we are indeed
interested in global income distribution. Global inequality
begins to matter.
1. Three concepts of inequality and how they
have evolved over the past 60 years
When we talk about inequality that transcends national
borders, often we have in mind not one but three differ-
ent concepts –even when we are not fully aware of it. I
am going to articulate these three concepts.
The first concept of inequality (let’s call it inequality 1)
is focused on inequality between nations of the world. It
is an inequality statistic calculated across GDPs or mean
incomes obtained from household surveys of all coun-
tries in the world, without population weighting. To show
how this is done, consider the three individuals in the
top row of Figure 1. The height of each person repre-
sents the GDP or mean income of his or her country.
Somebody from a poor country would be represented as
a short person, somebody from a middle-income country
as a person of medium height, and somebody from a
rich country as a very tall person. When we calculate this
concept of inequality, we take all countries with their
mean incomes –we have data for some 150 countries –
©2013 University of Durham and John Wiley & Sons, Ltd. Global Policy (2013) 4:2 doi: 10.1111/1758-5899.12032
Global Policy Volume 4 . Issue 2 . May 2013
198
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