The World Income Distribution of Income: Falling Poverty and…Convergence, Period Sala-i-Martin (2006)

Convergence literature Beta divergence: poor countries grow slower than rich countries Sigma divergence: dispersion of income per capita across countries grew over time

Changing unit of observation Idea: change unit of observation from country to individuals Results: beta and sigma convergence

Weighing by population Few Asian countries that converged to OECD are large Many diverging countries (Africa) are small Total population of Africa =1/2 population of China or India

Population Weights: Limits Assumes all individuals within a country have the same income Ex: income per capita in a country just above poverty line…no poors? Conclusion: use within country information…problematic (data)

Methodology Center mean at GDP/capita (National Statistics) Combine it with quintile income shares for every country and year 5B: trend of neighbors 329M: share of neighbors 5B: linear trend Excluded Then smooth the densities with a kernel

Growth Increased inequality Falling poverty Growth Population growth Falling poverty

No poors Growth Reduction in inequality Falling poverty

Sharp increase in inequality Little reduction on poverty Lost decade: (left shift), increase in poverty Different scale: Zero or negative growth Explosion in inequality Average worse off, richest better off Increase in poverty

Growth until 1990 Increased inequality in 1990 Negative growth and increased inequality : small increase in poverty (rich enough in 1990)

World Income Distribution Shift to the right (higher gdp/capita) No clear evolution of inequality China: growth + increase in inequality In 2000: top 1/5 th of chinese distribution around (Mexico, Poland, Russia) Niger fills gap (China, India, Indonesia)

Gdp/capita for majority of world increases Fall in poverty

Poverty rates: falling Monetary amount or caloric intake Consumption or income Position Baseline year

Africa: 14.5% of world poor in 1970, 74.5% today

Inequality Sound logic (population weights)?

Equality: convergence

Decomposition: Across and Within 1970: 71% across, 29% within Within increasing over time Across decreasing over time 2000: 61% across, 39% within Decline in across larger than increase in within: fall in income inequality