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The Globalization of Inequality        François Bourguignon      Paris School of Economics                        Moscow, ...
"With globalization, rich people are      getting richer and poor people poorer"Critiques of recent global development inc...
1. The evolution of global inequalitya)   Definition and measurementStatistical unit:     All individuals on earth (global...
The historical rise in global                         inequality                                                4Source: B...
The reversal in global                                            inequality trend                                        ...
Evolution of global extreme poverty                                      (developing countries)                           ...
Remark 1: Inter- and Intra country global                                               inequality                        ...
Remark 2: Inter-country inequality keeps              increasing                                           8
Evolution of global inequality:                   summary   Historical explosion of global inequality since 1820   Confu...
2. The unequalizing of national               income distributions   The widespread drop in the GDP labor share   Trend ...
The drop in the GDP labor share                                  11
Recent increase in inequality in          developed countries               Change in the Gini coefficient : mid 1980s to ...
Top incomes in developed                                 countries: a trend reversal                         Share of top ...
Inequality change in developing             countries (excluding LAC)                              Change in the Gini coef...
Inequality change in Eastern Europe and                                Russia                   Recent evolution of inequa...
Inequality change in LAC countries                             Change in the Gini coefficient : mid 1980s to mid 2000s,   ...
Top incomes in emerging countries:                    a trend parallel to developed countries?                      Share ...
Possible causes of changes in          national income inequality levels   Globalization as an important driving factor  ...
3. Policies to correct global inequality:                       global level   Catching-up by emerging countries likely t...
Domestic policies              to control national inequality   The issue of protection     Justified to a limited exten...
The key role of redistribution policies   Coordinated and more agressive tax policies in    developed countries   Develo...
Conclusion: domestic policies can reduce                           inequality without impairing growth!!640               ...
Conclusion: domestic policies can reduce                           inequality without impairing growth!!640640            ...
Thank you            24
Remark 1: Inter-country inequality keeps              increasing                                           25
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François Bourguignon (Paris School of Economics)_The Globalization of Inequality

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François Bourguignon (Paris School of Economics)_The Globalization of Inequality

  1. 1. The Globalization of Inequality François Bourguignon Paris School of Economics Moscow, April 2012 1
  2. 2. "With globalization, rich people are getting richer and poor people poorer"Critiques of recent global development increasingly bear on mouting inequality:  What is the evidence? • At global level • At national level  What are the causes of change?  What can be done ? 2
  3. 3. 1. The evolution of global inequalitya) Definition and measurementStatistical unit: All individuals on earth (global distribution) Country (population weighted or not) Data Income (consumption) :National Accounts (GDPpc or Cpc) Purchasing Power Parity correction (1990/2005) Population: UN Distribution data from household surveys (1985-2005) 3
  4. 4. The historical rise in global inequality 4Source: Bourguignon and Morrisson, 2002
  5. 5. The reversal in global inequality trend Global inequality: the 1990 trend reversal 0.750 80.0 0.700 70.0 0.650 60.0 0.600 80/20 ratio 50.0 Gini coefficient 0.550 40.0 0.500 30.0 0.450 20.0 0.400 10.0 0.350 0.300 0.0 1920 1930 1940 1950 1960 1970 1980 1990 2000 2010 5Source: Bourguignon, 2010
  6. 6. Evolution of global extreme poverty (developing countries) Evolution of global extreme poverty (1.25$ ppp a day): 1980-2008 60 2000 Number of poor people 1800 (right axis) 50 1600 1400 40 1200 Proportion of poor people Per cents (left axis) 30 1000 800 20 600 400 10 200 0 0 1980 1985 1990 1995 2000 2005 2010 Year 6Source: World Bank
  7. 7. Remark 1: Inter- and Intra country global inequality Decomposition of global inequality into Between and Within components (Theil coefficient) 1.000 0.900 Global inequality 0.800 0.700 0.600Theil coefficient International inequality 0.500 Inequality within countries 0.400 0.300 0.200 0.100 0.000 1810 1830 1850 1870 1890 1910 1930 1950 1970 1990 2010 7
  8. 8. Remark 2: Inter-country inequality keeps increasing 8
  9. 9. Evolution of global inequality: summary Historical explosion of global inequality since 1820 Confusing evolution in recent period :  Reversal in historical ascending trend in global inequality … but divergence between rich and poor countries rises  Within country inequality is increasing (although almost negligible effect in global inequality change) Continuous drop in (absolute poverty) Main drivers of these evolutions:  Asian growth  Poor growth performances in several African countries  Inequality increase in a number of countries 9
  10. 10. 2. The unequalizing of national income distributions The widespread drop in the GDP labor share Trend reversal of post-redistribution inequality in developed countries Increasing inequality in a number of emerging and developing countries 10
  11. 11. The drop in the GDP labor share 11
  12. 12. Recent increase in inequality in developed countries Change in the Gini coefficient : mid 1980s to mid 2000s, developed countries Finland Portugal New Zealand United Kingdom Norway Italy Germany United States Netherlands Sweden Austria Canada Belgium Luxembourg Japan Denmark Korea, Rep. Australia Greece France Ireland Spain-3 -2 -1 0 1 2 3 4 5 6Source: OECD Percentage points 12
  13. 13. Top incomes in developed countries: a trend reversal Share of top 5% income in total income: 1920-2009, selected developed countries 40 35 USA 30 UK 25 Japan FrancePer cents 20 15 Sweden 10 5 0 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000 13 2010 Source: Top incomes Year
  14. 14. Inequality change in developing countries (excluding LAC) Change in the Gini coefficient : mid 1980s to mid 2000s, Other emerging and developing countries China urban Poland Kyrgyz Republic Ghana Botswana China rural Albania Philippines Indonesia Slovenia Mozambique Vietnam Tajikistan India urban Morocco Tunisia India rural Slovak Republic Madagascar Hungary Mongolia Moldova South Africa Yemen, Rep. Panama Pakistan Lesotho Algeria Iran, Islamic Rep. Malaysia Kenya-10 -8 -6 -4 -2 0 2 4 6 8 14 10Source: World Bank, Povcal
  15. 15. Inequality change in Eastern Europe and Russia Recent evolution of inequality in Russia and some Eastern European countries (Gini coefficient) 45 Russian Federation 40 35 Poland 30 Hungary Slovak Republic 25Per cent 20 15 10 5 0 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 Year 15
  16. 16. Inequality change in LAC countries Change in the Gini coefficient : mid 1980s to mid 2000s, LAC countries Peru Argentina Uruguay Ecuador Jamaica Colombia Costa Rica Dominican Republic El Salvador Venezuela, RB Trinidad and Tobago Chile Honduras Nicaragua Guyana Guatemala Mexico Brazil-8 -6 -4 -2 0 2 4 6 8Source: World Bank, Povcal 16 Percentage points
  17. 17. Top incomes in emerging countries: a trend parallel to developed countries? Share of top 1% income in total income: 1920-2009, emerging countries + USA 30 25 20 Argentina USAPer cents 15 Indonesia 10 India 5 China Source: Top incomes 0 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000 17 2010 Year
  18. 18. Possible causes of changes in national income inequality levels Globalization as an important driving factor  Favorable to skilled labor, capital and natural resources in most countries  Asymmetric causes between developed and developing countries ??  Technical progress  Financial sector Importance of country-specific factors:  Domestic vs. foreign market focus  Human capital accumulation  Redistribution  Others (transition, fertility, labor market, …) 18
  19. 19. 3. Policies to correct global inequality: global level Catching-up by emerging countries likely to continue Concern about growing gap between poor and emerging countries International redistribution to the poorest countries from rich and emerging countries through:  Official Development Assistance  Trade restrictions or preferences  Capital flows ( FDI - profit repatriation)  Migration  Technological transfer 19
  20. 20. Domestic policies to control national inequality The issue of protection  Justified to a limited extent in poor countries, but less and less so in emerging countries  Increased protection by developed and emerging countries likely to stop the global equalizing trend without correcting inequality Positive distributional impact of solid domestic oriented growth The key role of redistribution policies … 20
  21. 21. The key role of redistribution policies Coordinated and more agressive tax policies in developed countries Development of taxing capacity and efficient social protection in emerging countries  The spread of cash transfer programs as the proof that cash redistribution is possible in developing countries  Financial development makes it easier to monitor individual incomes and to tax them Equalizing opportunities:  Human capital policies (Education, health care,..)  Taxing bequests  Fighting discrimination 21
  22. 22. Conclusion: domestic policies can reduce inequality without impairing growth!!640 The trend reversal of inequality in Brazil: 1975-2009620 Inequality600Gini coefficient * 100 Trend 1977-2002580560540520 1975 1980 1985 1990 1995 2000 2005 2010 Year 22
  23. 23. Conclusion: domestic policies can reduce inequality without impairing growth!!640640 20 The trend reversal of inequality in Brazil: 1975-2009 15620620 Inequality 10600600Gini coefficient * 100 5 Trend 1977-2002580580 0 GDPpc growth rate -5560560 -10540540 -15520520 -20 1975 1975 1980 1985 1990 1995 2000 2000 2005 2005 2010 2010 Year 23
  24. 24. Thank you 24
  25. 25. Remark 1: Inter-country inequality keeps increasing 25

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