Inequality Is Down

Alex liked Arnold’s trend summary:

Perhaps the most important trend of the past thirty years is the increased importance of cognitive skills relative to physical labor. … Consequences: … women[‘s] comparative advantage went from housework to market work. … [who now] … look for [mate] complementarity in consumption … [which] leads to more assortive mating … [which] leads to greater inequality across households … [and] children. …

Inequality is exacerbated by globalization and technological change. If your comparative advantage is basic physical labor, you have to compete with machines as well is with workers from the Third World.

But this is only for rich nations; global inequality is down:

We … estimate the income distribution for 191 countries between 1970 and 2006. … Using the official $1/day line, … world poverty rates have fallen by 80% from 0.268 in 1970 to 0.054 in 2006. The corresponding total number of poor has fallen from 403 million in 1970 to 152 million in 2006. … We also find similar reductions in poverty if we use other poverty lines. …

Global income inequality has fallen between 1970 and 2006. This is true for the Gini coefficient, for a wide variety of Atkinson indexes and General Entropy indexes as well as the 90th-to-10th and the 75th-to-25th percentile ratios. …

Total growth in world welfare measured is estimated to be between 77% and 160%, with most estimates over 100%.  At the regional level … whenever GDP grows, poverty tends to decline and whenever poverty declines, GDP tends to grow.  Poverty has declined substantially in East and South Asia, and has recently began declining in Africa.

Global change is of course what matters most.  If the price of making the world’s poor richer has been slower gains for the least rich of rich nations, it seems a good deal overall.

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  • Bill

    Good comparison. Makes you think. Thanks.

  • Bill

    I am troubled by Kling’s piece because it offers no statistics on inter-generational income mobility, and simply offers the assertion that affluent parents beget affluent children.

    Do they? What are the statistics on middle class parents having middle class children in the next generation…over time. Is that still true today, or are middle class children having difficulting maintaining the social or income status of their parents? And, what about social mobility of children of lower class households…what is their rate of achieving middle class status. Has that too changed over time.

    When you compare the NBER piece to Kling’s you are left feeling empty.

  • Plus the increase in inequality in the States is mostly a within education group phenomenon. Of course, Kling could mean some other measure of “cognitive skill”.

  • Interesting. But what makes you think that an exchange has taken place? That is, how is a local decrease in equality connected to a non-local increase?

  • Stuart Armstrong

    Great news, that I wasn’t explicitly aware of. Thanks for bringing it to my attention.

  • jorge

    Since local measures don’t correct for immigration and many complications at the low end of the income distribution, it’s not even clear that inequality of native-born Americans (leaving out also children of first generation immigrants) has gone up. The consumption measures (which also don’t correct for immigration and other complications) also show much less income inequality than any of the official income calculations.

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  • This result disagrees with recent work by Branko Milanovic at the World Bank. I only read the abstract, but I suspect that there is a methodological issue here. Many of these studies, and I suspect this one, average over country level Gini coefficients. This shows such a reduction. However, according to Milanovic if one looks directly at world distribution across countries, the Ginis are still rising, even as extreme poverty rates are declining.

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  • Dear Brothers and Sisters, Sons and Daughters of Liberty,

    There are only two types of human beings.

    One type just wants everyone to leave everyone else alone and these humans are students and advocates of the Philosophically Mature Non-Aggression Principle.

    The other type refuses to leave others alone and these humans are the Mobocracy Looter Minions with their hords of bureaucrats, jackboots, and mercenaries that perpetuate the perpetration of the loot and booty gravy-train. Rob-peter-to-buy-paul’s-vote bread and circuses of the doomed Amerikan Empire.

    You are either the one…or the other.

    The John Galt Solution of Starving The Monkeys is the only solution. Stop funding and forging your own chains and shackles. What are you leaving for your children and grandchildren and prodigy!?!

    The Mobocracy Looter Minions must be allowed to consume everything around them, then each other, and finally themselves. There is no other way. Ayn Rand wrote about it over fifty years ago and it rings as soundly today as it did then.

    Get your copy of Starving The Monkeys by Tom Baugh today, before the book is banned and the author is hunted down and Vince Fostered!

    John and Dagny Galt
    Atlas Shrugged, Owner’s Manual For The Universe!(tm)


    • Ayn Rand sure got it right to a large extent. Uncle Alan (Greenspan) and the boys thought she was talking to something else. Since when does a corporation become a person except in the minds of those suffering from some delusion. Hell, now they are hearing voices and they have appealed to the supreme court of the U.S. to give corporations the right to free speech. Howdy Doody anyone?