Recent trends in economic inequality
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inequality has been observable even without China. Stronger economic growth in all three major developing regions (Asia, Africa and Latin America) has contributed to this trend. Despite this recent improvement, international inequality remains very high –in fact, excluding China, the Gini coefficients of international inequality were higher in 2010 than they had been in 1980. That is, the country where a person was born, or where they live, is an important determinant of their expected income, given the enduring, large disparities in national income per capita. In addition, while low-income countries have been growing faster than highincome countries and international inequality is falling, the absolute gap in mean per capita incomes between these two groups of countries increased from $ 18,525 in 1980 to close to $ 32,900 in 2007, before falling slightly to $ 32,000 in 2010.2 The absolute gap between incomes per capita of low- and upper-middle income countries has more than doubled, from around $ 3,000 in 1980 to $ 7,600 in 2010. The magnitude of income disparities across countries is large, but so are disparities across individuals within each country. Figure I.2 shows national GDP per capita as well as average GDP per capita of the top and bottom 10 per cent of the population of selected countries. The mean income of a resident of Albania or Russia was lower than that of an individual in the lowest 10 per cent of the distribution in Sweden, who also earned almost 6 times more than an Albanian in the bottom 10 per cent of their country’s distribution, 80 times more than a Bolivian in the bottom decile, and 200 times more than an individual in the bottom decile in the Democratic Republic of the Congo in the late 2000s. At times, income distributions of different countries, even within the same region, barely overlap. For instance, the average income of an individual in the bottom decile in South Africa is higher than that of an individual in the richest decile in the Democratic Republic of the Congo.3 Yet, internal distribution also has a strong impact on the relative economic situation of individuals in different countries. Poor people in more unequal countries can have lower living standards than poor people in countries with lower average incomes but less unequal distribution. For instance, individuals in the bottom 10 per cent earned less in the United States than in Sweden, in Brazil than in Indonesia, and in South Africa than in Egypt in the late 2000s.
2 GDP adjusted for purchasing power parity (PPP) at 2005 constant international dollars from the World Bank World Development Indicators Database, available [online] at: http://databank.worldbank.org/ddp/home.do?Step=3&id=4. Accessed between 15 and 30 July 2012. 3 These comparisons should be interpreted with caution, as they are based on income estimates derived using PPP exchange rates. These have several problems, especially when comparing incomes at the lower end of the distribution, because they are based on the prices of an average basket of goods that may not be representative of the basket consumed by the poor in different societies, and the prices themselves are estimated through relatively infrequent country surveys upon which local inflation rates are applied.