Number Trends Cole Tomlinson Soc 120 Dr. Weston Centre College 11-9-07

“Gaps in income between the poorest and richest countries have continued to widen. In 1960, the 20% of the world’s people in the richest countries had 30 times the income of the poorest 20%—in 1997, 74 times as much.” Human Development Report 1999

One could make a strong argument that the post-Cold War world can be defined economically as the age of globalization. Many have argued that this age of a new global economy is responsible for a vast increase in inequality. However, new research is defending the prospect that a global economy is actually better for the world’s poor. By creating a World Distribution of Income, or WDI, and then plotting the WDI’s over time we can see how the distribution of money over the world has changed. If, in fact, the poor are getting poorer, it should be represented on the graph. In each decade since 1970, the world’s median income increased by 25 million every ten years. Thus from 1970 to 2000 the median income of the world grew from 175 million to over 250 million approximately. Not only has the median income grown, the distribution has shifted each decade farther and farther to the right (see table 1), illustrating that the world’s poor are getting richer.

A WDI is constructed by estimating an annual income distribution for each country and then combining these country distributions for each of the varying stages of income. To construct a WDI scholars begin with the analysis is the population-weighted income per capita, which acts as the average of each country’s distribution. As a measure of income, most WDI’s use the purchasing power parity–adjusted GDP per capita. Once a distribution of income has been estimated for each country/year, it is possible to construct an annual world distribution of income by integrating all of the country distributions (Sala-i-Martin).

To see the evolution of the WDI over time, Table 1 plots together the global distributions (without individual country functions) for 1970, 1980, 1990, and 2000. It is now apparent that the distribution shifts rightward, implying that the incomes of the majority of the world’s citizens increased over time. It is also clear that the fraction of the overall area that lies to the left of the poverty line declines, which indicates a reduction in poverty rates, and that the absolute area to the left of the poverty line also diminishes, which indicates an overall reduction in the number of poor citizens in the world. Again, the chart does not show clearly whether world income inequality increased or decreased, so precise measures of income inequality will have to be used if we want to discuss the evolution of inequality over the last three decades (Sala-i-Martin). So it may be the case that the poor are getting richer and the rich are getting richer(er). However, even in this case the poor are far better off than they have been.

Table 1. Quarterly Journal of Economics

Works Cited

United Nations Development Programme, Human Development Report 1999, at http://hdr.undp.org/reports/global/1999/en/. Accessed 11-7-07.

Sala-i-Martin, Xavier. "The World Distribution of Income: Falling Poverty and…Convergence, Period," Quarterly Journal of Economics, Vol. 121, No. 2 (May 2006), pp. 351–397.”.

Sala-i-Martin, Xavier. “Global Inequality fades and the Global Economy Grows”. The Heritage Foundation. www.heritage.org. Heritage Press: Jan. 16 2007.