1 World Income Distribution and Asian Economic Development: The International Development Economics Associates (IDEAs) workshop on "Development Experiences and Policy Options for a Changing World 3-5 th June, 2007 Tsinghua University, Beijing, China Ikemoto Yukio Institute of Oriental Culture The University of Tokyo

2 Contents World income distribution: 1820 – 1990 World income distribution: 1990 – 2003 Interpretation

3 World Income Distribution KOKUBUN Keisuke, IKEMOTO Yukio and HAMASHIMA Atsuhiro, "Asian Economic Development in World Income Distribution: ," The Memoirs of The Institute of Oriental Culture no.149, , pp dspace/bitstream/2261/2314/1/ioc14909.pdf

4 Assumption Income inequality within country is neglected. This does not make any significant differences so long as only its trend matters. National income is expressed in terms of PPP (purchasing power parity).

5 Catch-up Process

6 Kuznets Inverted U-shape

7 Income Inequality in the World Income Distribution

8 Gini coefficient,

9 Catching-up: Western countries

10 Catching-up: Asian countries

11 Theil by region

12 Decomposition of Theil Index Theil Index = Between-region component + within-region component Between-region component = Inequality which ignores inequality within each region Within-region component = Sum of weighted regional inequality

13 Decomposition of Theil: table

14 Decomposition of Theil: graph

15 Two effects of Asian growth (1) Asian economies were catching up the Western countries, which decreased world income inequality. (2) The catching-up process in Asia increased inequality in Asia.

16 Conclusion: World income inequality changed as Kuznets hypothesis predicted. World income inequality decreased after the 1980s. This was brought about by the catching-up process of Asian countries. However, this, on the other hand, increased inequality among Asian countries.

17 World Income Distribution This part is based on Kurata Masamitsu, Economic Analysis of Inequality: Reconsideration of Concepts and Estimation of World Income Inequality March 2007.

18 World income distribution, PPP, 1990 and 2003

19 World Income Inequality World income inequality decreased after 1990, mainly due to the rapid economic growth of China.

20 Changes in Gini coefficient

21 World Income Distribution, 2003

22 Gini coefficient by region

23 Income distribution in Asia

24 Income Inequality in Asia Income inequality in Asia also decreased mainly due to the rapid economic growth of China. This means the Asian economies entered the equalizing phase of Kuznets inverted U-shape hypothesis.

25 Conclusion: World income inequality decreased very rapidly after 1990s. This was brought about by the catching-up of Asian countries, especially China. In this period, inequality within Asia also decreased very rapidly due to the rapid growth of China.

26 So what? Is the equalization of income distribution among countries good? This does not tell us how people s life changed. It just suggest the life may improved. We need to know more about the life of people.

27 Interpretation: Marxist view Japanese exploited Asian people ….?

28 Per capita income in Asia

29 Income distribution in Asia

30 Japanese should work harder? Now Japan is no longer the biggest economy in Asia in terms of PPP. A student commented, Japanese should work harder to recover the No.1 position. I ask her What does it mean for Japanese people s life? We are not working for our country to be No.1.

31 Neo-classical view Japanese are rich because they are more productive. Some people misunderstand this as if it shows superiority of Japanese people. This is Rational Fool (Amartya Sen) who cannot distinguish between different concepts; richness and superiority. Japan has its own problems.

32 Increasing Income Inequality in Japan

33 Increasing Suicide Rate in Japan

34 Happiness

35 Evaluation of Inequality Income may not be a good indicator of people s life. Income inequality may not indicate inequality of life. Quality of Life (QOL) Human Development Indicator (UNDP) Capability Approach by Amartya Sen

36 References (1) Amartya Sen, Inequality Reexamined, This book insists to consider inequality in terms of capability rather than income because income is an inappropriate indicator of human well-being. This applies to poverty. (2) Wilkinson, The Impact of Inequality, This book analyzes the impact of inequality on health. In more unequal society, people suffer health problems more.

37 Thank you!