Recent trends in economic inequality
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Historically, Asia has experienced lower inequality than other developing regions. However, despite remarkable growth and impressive declines in extreme poverty, the region has seen widespread increases in income inequality at the national level, as well as in both urban and rural areas. Between 1990 and 2012, income inequality rose in 18 out of 31 countries with data–accounting for over 80 per cent of the region’s population. Most notable among them has been China, where inequality increased both in urban areas (with the Gini growing from 25.6 in 1990 to 35.2 in 2010) as well as in rural areas (from 30.6 to 39.4), leaving rural areas more unequal than urban areas – a position unlike that of most developing countries.6 In countries where inequality has declined, two key factors have contributed to such declines: the expansion of education, and public transfers to the poor. Starting in the early 1990s, increases in public expenditure on education throughout Latin America and the Caribbean, for instance, led to rising secondary enrolment and completion rates, and this became a major determinant of the fall in wage inequality (Ferreira and others, 2012; López-Calva and Lustig, 2010). This increase in public spending was, itself, the result of a shift in the economic policy model followed by many countries in the region. In general, there was growing social consensus on the need for Governments to serve as the engines of development, providing social protection as well as public infrastructure (Cornia, forthcoming). In countries where inequality has risen, income is concentrated increasingly at the very top of the distribution ladder. The share of income owned by the top quintile of the population increased in the majority of countries (61 out of 111) although it did not increase globally from 1990 to the mid-2000s (Ortiz and Cummins, 2011, table 5, p.16). However, income shares have risen significantly among the top 5 per cent and, particularly, among the top 1 per cent of the population. Much like the Gini coefficient, top income shares have increased since the 1980s, according to data available for the 16 developed and 6 developing countries shown in table I.27. Gains have been largest at the very top. In the United States of America, for instance, the average income of the top 5 per cent increased at an annual rate of 1.5 per cent between 1980 and 2011, while the growth rate of the income of the top 0.1 per cent was 4.0 per cent. In contrast, the average real income of the bottom 99 per cent of income-earners grew at an annual rate of only 0.6 per cent between 1976 and others, 2010). 6 Asian Development Bank (2012). Asian Development Outlook 2012: Confronting Rising Inequality in Asia. 7 The time series of top income shares shown here have been constructed using tax statistics. For additional information on top income data and methodology, see Atkinson and Piketty, eds. (2007); Atkinson and Piketty, eds. (2010) and Atkison, Pikkety and Saez (2011). Data available in Alvaredo and others, The World Top Incomes Database [online] at: http://g-mond.parisschoolofeconomics.eu/topincomes/ (accessed on 15 June 2012).