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Do Nations Just Get the Inequality They Deserve? The “Palma Ratio” Re-examined

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Abstract

The main aim of this paper is to take another look at differences in within-nation income distribution in the current era of neoliberal globalisation. The emphasis will be on the study of middle-income countries with high degrees of inequality, especially those that have implemented full-blown economic reforms, such as those in Latin America and Southern Africa. I first examine statistically how unequal is inequality across the world in terms of overall inequality as well as of different groups within each country; then, I analyse why there is so much diversity in terms of distributional outcomes across the world. In doing so it would become apparent why the Gini has already served its purpose as a practical index of income distribution (i.e., how it has passed its sell-by date) and why a new index that I proposed in Palma (2011) — which was later christened the “Palma Ratio” by Alex Cobham and Andy Sumner2 — could be more appropriate to understand issues such as those mentioned above.

Keywords

  • Nash Equilibrium
  • Income Inequality
  • Income Distribution
  • National Income
  • Income Share

These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.

Inequality is a choice.

Joseph Stiglitz

I am my choices.

Jean-paul Sartre

Also, Facultad de Administración y Economía, Universidad de Santiago. Tony Atkinson, Stephanie Blankenburg, Ha-Joon Chang, Mariana Chudnovsky, Alex Cobham, Jonathan DiJohn, Jorge Fiori, Juliano Fiori, Samer Frangie, Jorge Friedman, Ester Gonzalez, Daniel Hahn, Geoff Harcourt, Emily Hogan, Pamela Jervis, Jorge Katz, Mushtaq Khan, Javier Núñez, Cristóbal Palma, Guillermo Paraje, Carlota Pérez, Ashwani Saith, Claudia Sanhueza, Paul Segal, Ignês Sodré, Andy Sumner, Bob Sutcliffe, Lance Taylor and Robert Wade have made valuable contributions to my work in this area over the years. My late friends Jaime Crispi, Carlos Díaz-Alejandro, Andrew Glyn and Carlos Lopes also influenced my thinking on this subject. Participants at many conferences and seminars, and current and former PhD students also made very helpful suggestions. The key ideas of this paper were developed while trying to deal with the grief of the sudden death of my life-long friend Gina Malengreau Fiori; I dedicate this paper to her. The usual caveats apply.

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Palma, J.G., Stiglitz, J.E. (2016). Do Nations Just Get the Inequality They Deserve? The “Palma Ratio” Re-examined. In: Basu, K., Stiglitz, J.E. (eds) Inequality and Growth: Patterns and Policy. International Economics Association. Palgrave Macmillan, London. https://doi.org/10.1057/9781137554598_2

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