The Globalization of Inequality

Transcription

1 The Globalization of Inequality François Bourguignon Paris School of Economics Santiago, Buenos-Aires, Montevideo, October

2 "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 1. The evolution of global inequality a) Definition and measurement Statistical unit: Country (inter-country or international distribution) All individuals (global distribution) Data Income (consumption) :National Accounts Purchasing Power Parity correction (1990/2005) Population: UN Distribution data from household surveys ( ) 3

4 The historical rise in global inequality Source: Bourguignon and Morrisson,

5 Gini coefficient The reversal in global inequality trend Global inequality: the 1990 trend reversal /20 ratio

6 Evolution of global extreme poverty (developing countries) Source: World Bank 6

7 Theil coefficient Between and within country inequality Decomposition of global inequality into Between and Within components (Theil coefficient) Global inequality Inequality within countries International inequality

8 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 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 Satisfactory growth in poor countries since 2000 Inequality increase in a number of countries 8

9 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 9

10 The drop in the GDP labor share 10

11 Recent increase on 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 Source: OECD Percentage points 11

12 Per cents Top incomes in developed countries: a trend reversal 40 Share of top 5% income in total income: , selected developed countries 35 USA UK Japan France Sweden China Source: Top incomes Year 12

13 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 Source: World Bank, Povcal 13

14 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 Source: World Bank, Povcal 14 Percentage points

15 Per cents Top incomes in emerging countries: a trend parallel to developed countries? Share of top 1% income in total income: , emerging countries + USA Argentina USA 10 Indonesia India 5 China Source: Top incomes Year 15

16 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 Technical progress Financial sector Importance of country-specific factors: Domestic vs. foreign market focus Human capital accumulation Redistribution Others (fertility, labor market, ) Asymmetry between developed and developing countries easily understandable 16

17 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 17

18 Domestic policies to control national inequality The issue of protection Justified 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 The positive distributional impact of solid domestic oriented growth The key role of redistribution policies 18

19 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 19

20 Gini coefficient *1000 Conclusion: domestic policies can reduce inequality without impairing growth!! The trend reversal of inequality in Brazil: Trend Year 20

21 Thank you 21

22 Remark 1: Inter-country inequality keeps increasing 22

23 Remark 1: Inter-country inequality keeps increasing 23