The Journal of Economic Inequality

, Volume 10, Issue 1, pp 1–18 | Cite as

Global inequality recalculated and updated: the effect of new PPP estimates on global inequality and 2005 estimates

Article

Abstract

The results of new direct price level comparisons across 146 countries in 2005 have led to large revisions of PPP (purchasing power parity) exchanges rates, particularly for China and India. The recalculations of international and global inequalities, using the new PPPs, show that inequalities are substantially higher than previously thought. Inequality between global citizens is estimated at 70 Gini points rather than 65 as before. This high level of inequality is confirmed by the results obtained from the new set of 122 national household surveys from around year 2005.

Keywords

Global inequality International inequality Purchasing power parity 

JEL Classification

D31 I3 057 

Preview

Unable to display preview. Download preview PDF.

Unable to display preview. Download preview PDF.

References

  1. 1.
    Ackland, R., Dowrick, S., Freyens, B.: Measuring Global Poverty: Why PPPs Matter. Australian National University Department of Economics, mimeograph. Available at http://voson.anu.edu.au/papers/GlobalPoverty_17Sep2008.pdf (2008)
  2. 2.
    Ahluwalia, M.S., Carter, N.G., Chenery, H.B.: Growth and poverty in developing countries. J. Dev. Econ. 6, 299–341 (1979)CrossRefGoogle Scholar
  3. 3.
    Ahmed, S.: International Comparison of Chinese Prices. Unpublished World Bank working paper, World Bank: Comparative Analysis and Data Division, Washington, D.C. (1983)Google Scholar
  4. 4.
    Australian Bureau of Statistics: The International Comparison Program and purchasing power parities. Available at http://siteresources.worldbank.org/ICPINT/Resources/internationalppp_AUS.pdf (2006)
  5. 5.
    Anand, S., Segal, P.: What do we know about global income inequality? J. Econ. Lit. 46(1), 57–94 (2007)CrossRefGoogle Scholar
  6. 6.
    Berry, A., Bourguignon, F., Morrisson, C.: Changes in the world distribution of income between 1950 and 1977. Econ. J. 93, 331–50 (1983)CrossRefGoogle Scholar
  7. 7.
    Chen, S., Ravallion, M.: China is Poorer than we Thought, but no Less Successful in the Fight Against Poverty. Policy Research Working Paper No. 4621, May (2008)Google Scholar
  8. 8.
    Chen, S., Ravallion, M.: The Developing World is Poorer than we Thought, but no Less Successful in the Fight Against Poverty. World Bank Policy Research Working Paper No. 4703, August. Forthcoming in Quarterly Journal of Economics, vol. 125(4), p. 2010 (2008)Google Scholar
  9. 9.
    Davies, J.M., Shorrocks, A.F.: Optimal grouping of income and wealth data. J. Econom. 42, 97–108 (1989)CrossRefGoogle Scholar
  10. 10.
    Deaton, A.: Measuring poverty in a growing world (or measuring growth in a poor world). Rev. Econ. Stat. 1, 1–19 (2005)CrossRefGoogle Scholar
  11. 11.
    Deaton, A.: Price indexes, inequality, and the measurement of world poverty. AEA Presidential Address. Am. Econ. Rev. 100(1), 5–34 (2010)Google Scholar
  12. 12.
    Deaton, A., Heston, A.: Understanding PPPs and PPP-Based National Accounts. Research Program on Development Studies, Princeton University (2009)Google Scholar
  13. 13.
    Dowrick, S., Akmal, M.: Contradictory trends in global income inequality: a tale of two biases. Rev. Income Wealth 51(2), 201–230 (2005)CrossRefGoogle Scholar
  14. 14.
    Grosh, M.E., Nafziger, E.W.: The computation of world income distribution. Econ. Dev. Cult. Change 34, 347–359 (1986)CrossRefGoogle Scholar
  15. 15.
    Heston, A.: Treatment of China in PWT 6.1. Available http://pwt.econ.upenn.edu/ (2001)
  16. 16.
    Holtz, C.A.: China’s reform period economic growth: how reliable are Angus Maddison’s estimates. Rev. Income Wealth 52(1), 85–119 (2006)CrossRefGoogle Scholar
  17. 17.
    Holtz, C., Brand, L.: Spatial price estimates and price differences in China: estimates and implications. Econ. Dev. Cult. Change 55(1), 43–86 (2006)CrossRefGoogle Scholar
  18. 18.
    Li, Hongyi., Squire, L., Zou, Heng-fu.: Explaining international and intertemporal variations in income inequality. Econ. J. 108, 26–43 (1998)CrossRefGoogle Scholar
  19. 19.
    Joliffe, D., Krushelnytskyy, B.: Bootstrap standard errors for indices of inequality: INEQERR. Available at http://users.starpower.net/djolliffe/stb/ineqerr.pdf (n.d.)
  20. 20.
    Maddison, A.: Chinese Economic Performance in the Long Run. OECD Development Centre, Paris (1998)Google Scholar
  21. 21.
    Maddison, A.: The World Economy: Historical Statistics. OECD Development Centre Studies, Paris (2003)Google Scholar
  22. 22.
    Maddison, A.: Measuring the economic performance of transition economies: some lessons from Chinese experience. Rev. Income Wealth 55, 423–441 (2009)CrossRefGoogle Scholar
  23. 23.
    Milanovic, B.: True world income distribution, 1988 and 1993: first calculation based on household surveys alone. Econ. J. 112(476), 51–92 (2002)CrossRefGoogle Scholar
  24. 24.
    Milanovic, B.: Worlds Apart: Measuring International and Global Inequality. Princeton University Press, Princeton (2005)Google Scholar
  25. 25.
    Milanovic, B.: Why did the Poorest Countries Fail to Catch up? Carnegie Working Paper No. 62, September (2005)Google Scholar
  26. 26.
    Milanovic, B.: Global income inequality: what it is and why it matters. World Econ. 7(1), 131–153 (2006)Google Scholar
  27. 27.
    Milanovic, B.: An even higher global inequality than previously thought: a note on global inequality calculations using the 2005 International Comparison Program results. Int. J. Health Serv. 38(3), 421–429 (2008)CrossRefGoogle Scholar
  28. 28.
    Minoiu, C., Reddy, S.: Real income stagnation of countries: 1960–2001. J. Dev. Stud. 45(1), 1–23 (2009)CrossRefGoogle Scholar
  29. 29.
    Pritchett, L.: Divergence, big time. J. Econ. Perspect. 11(3), 3–17 (1997)CrossRefGoogle Scholar
  30. 30.
    Ravallion, M.: Should poverty measures be anchored to the national accounts? Econ. Polit. Wkly. 34, 3245–3252 (2000)Google Scholar
  31. 31.
    Ravallion, M., Chen, S.: China’s (Uneven) Progress Against Poverty. Policy Research Working Paper No. 3408, September (2004)Google Scholar
  32. 32.
    Ravallion, M., Chen, S., Sangraula, P.: Dollar a Day Revisited. World Bank Policy Research Working Paper No. 4620, May (2008)Google Scholar
  33. 33.
    Ruoen, R., Chen, K.: China’s GDP in U.S. Dollars Based on Purchasing Power Parity. Policy Research Working Paper No. 1415 (1995)Google Scholar
  34. 34.
    Theil, H.: World income inequality and its components. Econ. Lett. 2(1), 99–102 (1989)CrossRefGoogle Scholar
  35. 35.
    van Ourti, T., Clarke, P.: A simple correction to remove the bias of the Gini coefficient due to grouping. Rev. Econ. Stat. (2010, in press)Google Scholar
  36. 36.
    World Bank: World Development Report 2006: Equity and Development. Oxford University Press and the World Bank, Washington (2006)Google Scholar
  37. 37.
    World Bank: Global Purchasing Power: Parities and Real Expenditures, 2005 International Comparison Program. World Bank, Washington (2008)Google Scholar
  38. 38.
    Yao, S., Zhu, L.: Understanding income inequality in China: a multi-angle perspective. Econ. Plan. 31(2–3), 133–150 (1998)CrossRefGoogle Scholar

Copyright information

© Springer Science+Business Media, LLC. 2010

Authors and Affiliations

  1. 1.World Bank, Research DepartmentWashingtonUSA
  2. 2.School of Public PolicyUniversity of MarylandMDUSA

Personalised recommendations