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"Wherever there is great property, there is great inequality. For one very rich man there must be at least five hundred poor, and the affluence of the few supposes the indigence of the many".
(Adam Smith, An Inquiry into the Nature and  Causes of the Wealth of Nations, (Book 5, Ch. 1, Part II p.580)

On planning for development: Economic inequality, poverty, social exclusion and corruption in
Africa  Asia  Latin America           China  United States

Real-World Economics Review - 7 October 2014
World Economics Association (WEA) 
Special issue on Piketty's Capital

IMF Staff Discussion Note SDN/14/02

Redistribution, Inequality,and Growth

Jonathan D. Ostry, Andrew Berg, and Charalambos G. Tsangarides - February 2014

Economists are increasingly focusing on the links between rising inequality, crisis risk, and sustainable growth. Rajan (2010) underscores how inequality intensified the leverage and financial cycle, sowing the seeds of crisis, while Stiglitz (2012) stresses the role of politicaleconomy factors (especially the influence of the rich) in allowing financial excess to balloon ahead of the crisis. Berg and Ostry (2011) document the multi-decade and multi-country evidence that greater equality can help sustain growth. This work builds on a tentative consensus in the growth literature that inequality can undermine progress in health and education, cause investment-reducing political and economic instability, and undercut the social consensus required to adjust in the face of major shocks, and thus that it tends to reduce the pace and durability of growth (Persson and Tabellini, 1994; Easterly, 2007; Berg, Ostry and Zettelmeyer, 2012).

That equality seems to drive higher and more sustainable growth does not, in itself, support efforts to redistribute. In particular, inequality may impede growth at least in part because it calls forth efforts to redistribute through the fiscal system, efforts that themselves may undermine growth. In such a situation, even if inequality is bad for growth, taxes and transfers may be precisely the wrong remedy. While the literature on this score remains controversial, the notion of a tradeoff between redistribution and growth seems deeply embedded in policymakers’ consciousness. The negative effect of redistributive policies is indeed the central theme of Arthur Okun’s famous 1975 book on the tradeoffs between efficiency and equity and on the efficiency “leaks” that efforts to reduce inequality engender.

We nonetheless see an important positive conclusion from our look at the big picture. Extreme caution about redistribution—and thus inaction—is unlikely to be appropriate in many cases. On average, across countries and over time, the things that governments have typically done to redistribute do not seem to have led to bad growth outcomes, unless they were extreme. And the resulting narrowing of inequality helped support faster and more durable growth, apart from ethical, political, or broader social considerations.

178 OXFAM BRIEFING PAPER – SUMMARY - 20 January 2014

Working for the few
Political capture and economic inequality

In November 2013, the World Economic Forum released its ‘Outlook on the Global Agenda 2014’ in which it ranked widening income disparities as the second greatest worldwide risk in the coming 12 to 18 months. Based on those surveyed, inequality is ‘impacting social stability within countries and threatening security on a global scale.’ Oxfam shares its analysis, and wants to see the 2014 World Economic Forum make the commitments needed to counter the growing tide of inequality.
Some economic inequality is essential to drive growth and progress, rewarding those with talent, hard earned skills, and the ambition to innovate and take entrepreneurial risks. However, the extreme levels of wealth concentration occurring today threaten to exclude hundreds of millions of people from realizing the benefits of their talents and hard work.


Inequality, the Great Recession, and Slow Recovery

Barry Z. Cynamon (Federal Reserve Bank of St. Louis) and Steven M. Fazzari (Washington University in St. Louis) - January 2014
Rising inequality reduced income growth for the bottom 95 percent of the income distribution beginning about 1980, but that group’s consumption growth did not fall proportionally. Instead, lower saving led to increasing balance sheet fragility for the bottom 95 percent, eventually triggering the Great Recession. We decompose consumption and saving across income groups. The consumption/income ratio of the bottom 95 percent fell sharply in the recession, consistent with tighter borrowing constraints. The top 5 percent ratio rose, consistent with consumption smoothing. The inability of the bottom 95 percent to generate adequate demand helps explain the slow recovery.

From the World Bank Development Research Group - December 2013

Global Income Distribution
From the Fall of the Berlin Wall to the Great Recession

By Christopher Lakner and Branko Milanovic
The paper presents a newly compiled and improved database of national household surveys between 1988 and 2008. In 2008, the global Gini index is around 70.5 percent having declined by approximately 2 Gini points over this twenty year period. When it is adjusted for the likely under-reporting of top incomes in surveys by using the gap between national accounts consumption and survey means in combination with a Pareto-type imputation of the upper tail, the estimate is a much higher global Gini of almost 76 percent. With such an adjustment the downward trend in the Gini almost disappears. Tracking the evolution of individual countrydeciles shows the underlying elements that drive the changes in the global distribution: China has graduated from the bottom ranks, modifying the overall shape of the global income distribution in the process and creating an important global “median” class that has transformed a twin-peaked 1988 global distribution into an almost single-peaked one now. The “winners” were country-deciles that in 1988 were around the median of the global income distribution, 90 percent of whom in terms of population are from Asia. The “losers” were the country-deciles that in 1988 were around the 85th percentile of the global income distribution, almost 90 percent of whom in terms of population are from mature economies.

From Finance & Development - December 2013, Vol. 50, No. 4

Who Let the Gini Out?

Davide Furceri and Prakash Loungani

Fiscal policy and inequality

Capital account liberalization and fiscal consolidation confer benefits but also lead to increased inequality
Income inequality is at historic highs. The richest 10 percent took home half of U.S. income in 2012, a division of spoils not seen in that country since the 1920s. In countries that belong to the Organisation for Economic Co-operation and Development, inequality increased more in the 3 years up to 2010 than in the preceding 12. The recent increases come on top of growing inequality for more than two decades in many advanced economies. What explains this rise?

By Michael Robinson - BBC World Service - 17 January 2012
The Wealth Gap - Inequality in Numbers

With the political temperature rising, a stream of new analysis is revealing how sharply inequality has been growing. In October, the US Congressional Budget Office (CBO) caused a storm by revealing how big a slice of income gains since the late 1970s had gone to the richest 1% of households.
The message was dramatic.
Over the 28 years covered by the CBO study, US incomes had increased overall by 62%, allowing for tax and inflation.
But the lowest paid fifth of Americans had got only a small share of that: their incomes had grown by a modest 18%.

From OECD - 5 December 2011

Divide we stand. Why inequality keeps rising

Concerns of growing income inequality loom large in public debate and policy discussion. Indeed, in most OECD countries and many emerging economies, the gap between rich and poor has widened over the past decades. This occurred even when countries were going through a period of sustained economic growth prior to the Great Recession. Today, the economic crisis is putting additional pressure on the distribution of incomes. Greater inequality raises economic, political and ethical challenges as it risks leaving a growing number of people behind in an ever-changing economy.
The 2008 OECD report Growing Unequal? documented and analysed the key features and patterns of trends in income inequality in OECD countries. This publication Divided We Stand: Why Inequality Keeps Rising is the follow-up to this report. It analyses the underlying forces and key drivers of rising inequality and discusses policies which are most promising to counter it.
Divided We Stand examines whether and how trends in globalisation, technological change and institutions and policies translated into wage and earnings inequality. It analyses how inequality in labour and capital markets translates into household income inequality, looking also at factors such as the impact of changing family structures and changes in other income sources. Finally, Divided We Stand examines the effects of tax and benefit systems as well as public services in smoothing market-based inequality and how these effects have changed over time.

From The World Bank Group
The Puppet Masters
How the corrupt use legal structures to hide stolen assets and what to do about it.
Emile van der Does de Willebois, Emily M. Halter, Robert A. Harrison, Ji Won Park, and J. C. Sharman - October 2011

Research carried out for this report shows that these cases of “grand” (that is, large scale) corruption are not untypical. Such cases can be found around the world, in both industrial and developing countries, whether as the place that the proceeds originate from or as the place they eventually end up. A review of some 150 cases carried out as part of this study showed that they shared a number of common characteristics. In the vast majority of them,
--a corporate vehicle was misused to hide the money trail;
--the corporate vehicle in question was a company or corporation;
--the proceeds and instruments of corruption consisted of funds in a bank account;
--in cases where the ownership information was available, the corporate vehicle in question was established or managed by a professional intermediary.

This report casts light on how corporate vehicles are misused to conceal the proceeds of grand corruption. It describes how providers of legal, financial and administrative (management) services—including banks, financial institutions, lawyers, accountants, and other professionals that are known as trust and company service providers (TCSPs)—can be employed to facilitate such schemes. While this report focuses on the use of front companies and the abuse of corporate opacity to conceal corruption, the weaknesses highlighted in this report are not specific to corruption. There is evidence of similar misuse of legal entities, legal arrangements as well as charities, in the context of other criminal and illicit behaviors, including escaping international sanctions and the funding of terrorist organizations.

From WIDER working papers 2011

Growth, Inequality, and Poverty Reduction in Developing Countries: Recent Global Evidence
Augustin Kwasi Fosu

The study presents recent global evidence on the transformation of economic growth to poverty reduction in developing countries, with emphasis on the role of income inequality. The focus is on the period since the early/mid-1990s when growth in these countries as a group has been relatively strong, surpassing that of the advanced economies. Both regional and country-specific data are analysed for the US$1.25 and US$2.50 level poverty headcount ratios using the most recent World Bank data. The study finds that on average income growth has been the major driving force behind both the declines and increases in poverty. The study, however, documents substantial regional and country differences that are masked by this ‘average’ dominant growth story. While in the majority of countries growth was the major factor behind falling or increasing poverty, inequality, nevertheless, played the crucial role in poverty behaviour in a large number of countries. And, even in those countries where growth has been the main driver of poverty reduction, further progress could have occurred under relatively favourable income distribution. For more efficient policy-making, therefore, idiosyncratic attributes of countries should be emphasized. In general, high initial levels of inequality limit the effectiveness of growth in reducing poverty while growing inequality reduces poverty directly for a given level of growth. It would seem judicious, therefore, to accord special attention to reducing inequality in certain countries where income distribution is especially unfavourable. Unfortunately, the present study also points to the limited effects of growth and inequality-reducing policies in low-income countries.

From UNDP:
Markets, the State and the Dynamics of Inequality

The main objective of this project is to discuss and propose specific policies directed to reduce welfare gaps among and within different social groups, through economic growth and efficient and equitable market mechanisms

World Institute for Development Economics Research
World Income Inequality Database

The UNU-WIDER World Income Inequality Database (WIID) collects and stores information on income inequality for developed, developing, and transition countries. The database and its documentation are available on this website.

Economic Policy Institute
Research and Ideas for Shared Prosperity

The Economic Policy Institute (EPI) will publish The State of Working America, its flagship publication since 1988, in website form, in early January 2011. The comprehensive economic data that has in the past been in book form will soon be available on the website -- for the first time in a searchable and highly user-friendly format. The data will be more accessible than ever before to academics, policy-makers, the media, and the public. Unlike past editions, this year's edition of The State of Working America will not be published in book form.

Report: The Persistent Problem--Inequality, Difference, and the Challenge of Development
Released on July 10, 2008

Global levels of inequality today are at extremely high levels even as conditions for alleviating deprivation are more favorable than ever before.  Inequities in the international system and within developing countries threaten to halt progress toward greater democratization and economic development for the poorest countries in the world.
The report by the Task Force on Difference, Inequality, and Development of the American Political Science Association, entitled The Persistent Problem: Inequality, Difference, and the Challenge of Development, highlights how these problems threaten efforts to alleviate deprivation such as the Millennium Development Goals.  It shows that in an increasingly interdependent world, international institutions should be made more accountable to poor countries if they are to maintain their legitimacy and effectiveness.

For democracy and capitalism to fulfill their promise of ending deprivation in developing countries, they must be based on institutions that reflect their distinctive histories and cultures. Deepening democratic processes in developing countries is essential for establishing political and economic institutions to equitably reflect local experiences. Effective change will be interactive, not imposed.

World Bank Working Paper - May 2008
Global Poverty and Inequality: A Review of the Evidence
Francisco H.G. Ferreira and Martin Ravallion

Drawing on a compilation of data from household surveys representing 130 countries, many over a period of 25 years, this paper reviews the evidence on levels and recent trends in global poverty and income inequality. It documents the negative correlations between both poverty and inequality indices, on the one hand, and mean income per capita on the other.
It points to the dominant role of Asia in accounting for the bulk of the world’s poverty reduction since 1981. The evolution of global inequality in the last decades is also described, with special emphasis on the different trends of inequality within and between countries. The statistical relationships between growth, inequality and poverty are discussed, as is the correlation between inequality and the growth elasticity of poverty reduction. Some of the recent literature on the drivers of distributional change in developing countries is also reviewed

From International Labour Organization

Labour Shares - Technical Brief No. 01, 2007

In most regions of the world, the share of national income that goes to labour has been declining over the past two or three decades.
This coincides with the advent of the latest wave of globalization, and several studies provide evidence that globalization has contributed to the decline in labour shares.
Several aspects of globalization, and in particular financial openness and financial crises, have a detrimental impact on labour incomes.
The downward trend indicates that either wages or employment creation in the formal sector have not kept pace with economic growth during globalization, or that a combination of both occurred.
A falling labour share is thus the mirror-image of slow wage growth and low employment elasticities. It is consistent with the finding that economic growth does not create jobs at the rate it used to, and that income gains for workers have often not kept pace with growth.
Moreover, a shift of incomes away from labour and towards capital has contributed to rising inequality.
To make globalization fair, it is important to reverse the shift of factor shares and to increase the share of national incomes that accruesto labour.

Measuring Labor's Share - By Alan B. Krueger, 1999
Getting Income Shares Right - By Douglas Gollin, 2002
Re-measuring Labor's Share - By Andrew T. Young and Hernando Zuleta, 2008
Getting income shares right: a panel data investigation for OECD countries - By Aamer S. Abu-Qarn and Suleiman Abu-Bader, 2007
Effects of globalization on labor's share in national income" - By A. Guscina, 2006

World of Work Report 2008
Income Inequality in the age of Financial Globalization

The ongoing global economic slowdown is affecting low-income groups disproportionately. This development comes after a long expansionary phase where income inequality was already on the rise in the majority of countries.
● The recent period of economic expansion was accompanied by substantial employment growth across most regions. Between the early 1990s and 2007, world employment grew by around 30 per cent. However, there was considerable variation in labour market performance between countries. In addition, not all individuals shared equally in the employment gains. In a number of regions, women continued to represent a disproportionate share of non-employed persons – reaching nearly 80 per cent in the Middle East, North Africa and Asia and the Pacific.
● Employment growth has also occurred alongside a redistribution of income away from labour. In 51 out of 73 countries for which data are available, the share of wages in total income declined over the past two decades. Th e largest decline in the share of wages in GDP took place in Latin America and the Caribbean (-13 points), followed by Asia and the Pacific (-10 points) and the Advanced Economies (-9 points).
● Between 1990 and 2005, approximately two thirds of the countries experienced an increase in income inequality (as measured by changes in the Gini index). In other words, the incomes of richer households have increased relative to those of poorer households. Likewise, during the same period, the income gap between the top and bottom 10 per cent of wage earners increased in 70 per cent of the countries for which data are available.
● The gap in income inequality is also widening – at an increasing pace – between the firms’ executives and the average employee. For example, in the United States in 2007, the chief executive offi cers (CEOs) of the 15 largest companies earned 500 times more than the average worker. Th is is up from 360 times more in 2003. Even in Hong Kong (China) and South Africa where executives are paid much less than their United States’ counterparts, CEO pay still represents 160 and 104 times, respectively, the wages of the average worker.

Background papers prepared for World Development Report 2006: equity and development

Claessens, Stijn and Enrico Perotti. 2005.
The Links between Finance and Inequality: Chanels and Evidence.
Much attention has recently been given to whether market reforms reduce or increase inequality. Inequality often reflects unequal access to productive opportunities and recent evidence has highlighted the presence of onerous barriers to entry, especially in developing countries. This paper focuses on the relationships between inequality and finance. In principle, a better financial system can help overcome barriers, and thereby increase economic growth and reduce inequality. Indeed, a more developed, that is deeper, financial sector has been shown to aid economic growth. Financial reform will only reduce inequality, however, if it improves access for more individuals with growth opportunities. Reforms thus need to broaden, not just deepen financial systems.
At the same, as recent theoretical and empirical work has shown, ex ante inequality can hinder welfare enhancing reforms. Concentrated economic and political powers will likely block financial (and other) reforms, or manipulate their design and/or implementation, so that the benefits reach fewer individuals. Also, by design or implementation, financial reforms can lead risks to be allocated unfairly and costs to be socialized, especially around financial crises, further worsening inequality. Furthermore, reforms that do not provide gains for many may be followed by a political backlash that may make even valuable financial sector reforms not sustainable.
Decker, Klaus, Caroline Sage and Milena Stefanova. 2005.
Law or Justice: Building Equitable Legal Institutions.
It is now widely accepted that the ‘rule of law’ is key to sustainable development. The different legal or rule-based systems in any given society underpin the institutions that govern both market and non-market interactions; they determine the distribution of economic, social and political rights and obligations affecting both economic and non economic relationships. They shape the regulation of market practices and the delivery of public services, and hence the opportunities people have to take part in economic activity and generate fair returns.1 Legal institutions also provide mechanisms to mediate conflict resolve disputes and sustain peace and order.
The belief in the importance of legal institutions is reflected in the emergence of Justice Sector Reform (JSR) as a central concern for many development agencies. In the past fifteen years, the World Bank has financed hundreds of legal and judicial reform initiatives and numerous stand alone projects, and has recently committed to scaling up these efforts. Other bi-lateral development agencies and multi-lateral donors have committed hundreds of millions of dollars to reforming judicial systems, with the majority of developing countries and former socialist states now receiving assistance for some kind of justice sector reform.
Unfortunately, what is less clear in current development thinking is how a ‘rule of law system’ is fostered or achieved and what this means for Justice Sector reform initiatives; a belief in the need for ‘the rule of law’ tells us little about what the rule of law actually means, how it manifests itself or how a given society can achieve it. Despite concerted efforts, over a decade of projects have reported limited success and brought current approaches into question.
Hoff, Karla. 2004.
What Can Economists Explain by Taking into Account People's Perceptions of Fairness? Punishing Cheats, Bargaining Impasse, and Self-Perpetuating Inequalities.
There is a standard hypothesis in economics, the rational self-interest hypothesis, which is based on a radically simplified view of human nature. In this view, individuals are exclusively motivated by their material self-interest and unboundedly rational in the pursuit of it. This hypothesis provides accurate predictions for competitive markets with standardized goods. However, much economic activity occurs outside of such markets—in markets with a small number of traders, within firms...
Pinglé, Vibha. 2005.
Faith, Equity, and Development.
Religion, as Casanova observes, went public in the 1980s and it has exhibited a Janus face since – “as the carrier not only of exclusive, particularist, and primordial identities but also of inclusive, universalist, and transcending ones.”1 It has worn this Janus face because, I argue, religion has for sometime been torn by the identity politics of our times, consisting of two conceptually distinguishable phenomena and processes: the politics of equal dignity, and the politics of difference. These two political dramas have used the discourse of religion and are leading to new and not surprisingly contradictory interpretive strands of modernity, development, and equity.
In order to understand how religious movements are influencing the development process and in particular what implications they have for equity and an anti-poverty agenda it is critical first to explicate how religious movements may be interpreted using the lens of identity politics.
Ravallion, Martin. 2005
Inequality is Bad for the Poor.
It has been argued that inequality should be of little concern in poor countries on the grounds that: (i) absolute poverty in terms of consumption (or income) is the overriding issue in poor countries, and (ii) the only thing that really matters to reducing absolute income poverty is the rate of economic growth. This article takes (i) as given but questions (ii). It is argued that there are a number of ways in which the extent of inequality in a society, and how it evolves over time, influences the extent of poverty today and the prospects for rapid poverty reduction in the future.
Chirayath, Leila, Caroline Sage and Michael Woolcock. 2005
Customary Law and Policy Reform: Engaging with the Plurality of Justice Systems.
The importance of building effective legal and regulatory systems has long been recognized by development professionals, yet there have been few programmatic initiatives that have translated empirical evidence and political intention into sustained policy success. A key reason is that such efforts have too often consisted of top-down technocratic initiatives that have inadequately appreciated the social and cultural specificity of the particular context in which they operate, as well as the complexity of the systems they have attempted to create. Justice sector reforms have frequently been based on institutional transplants, wherein the putatively ‘successful’ legal codes (constitutions, contract law, etc.) and institutions (courts, legal services organizations, etc.) of developed countries have this been imported almost verbatim into developing countries. Reforms have often lacked any clear theory about the roles and functions of justice systems, and have failed to consider how successful legal systems in developed countries were actually constructed—including how they gained authority and legitimacy. Local level context and the systems of justice actually operating in many contexts were largely ignored. As such, justice sector reformers have failed to acknowledge, and thus comprehend, how the systems—which, at least in rural areas, are predominantly customary, idiosyncratic to specific sub-regional and cultural contexts, and residing only in oral form—by which many people (if not most poor people) in developing countries order their lives function.

The following papers were prepared in collaboration with the U. K. Department for International Development (DfID) and the World Bank's Social Development Department (see the November 15, 2004 Seminar on Promoting Equity in Development, under Consultations).

Andersson, Martin and Christer Gunnarsson. 2004
Egalitarianism in the Process of Modern Economic Growth: The Case of Sweden.
For some decades after WWII Sweden was time and again referred to as a ‘model’ in terms of economic and social development. At least until the mid 1980s Sweden was frequently taken to represent the ‘middle way’ between capitalism and socialism due to its evident achievement in building up a publicly financed (tax-based) welfare state while at the same time preserving the conditions and dynamics of a highly expansive and internationally competitive free-market economy. For anyone looking for historical evidence in support of the feasibility of a ‘growth with equity’ development strategy the Swedish experience with ‘capitalism’s most advanced welfare state’ (Freeman 1995:17), would then appear to offer an almost perfect match. Although this ‘ideal model’ has somewhat flaked off in recent decades under the pressures of globalisation and deregulation it is probably true that Sweden remains more egalitarian than most other developed economies. Inter-sectoral and regional income disparities remain fairly limited and the gender income gap has been considerably narrowed. By and large, it appears that equality remains a fundamental trait of society.
Barrientos, Armando. 2004
Cash Transfers for Older People Reduce Poverty and Inequality.
The paper discusses the poverty and inequality reduction properties of non-contributory pension in Brazil, South Africa and Bangladesh. It examines the development of non-contributory pension programmes in the countries involved, and the institutional factors behind their extension and current sustainability. It also examines the incidence of non-contributory pension programmes on poverty and inequality.
Black, Richard, Claudia Natali and Jessica Skinner, 2005
Migration and Inequality.
Introduction International migration is a powerful symbol of global inequality, whether in terms of wages, labour market opportunities, or lifestyles. Millions of workers and their families move each year across borders and across continents, seeking to reduce what they see as the gap between their own position and that of people in other, wealthier, places. In turn, there is a growing consensus in the development field that migration represents an important livelihood diversification strategy for many in the world’s poorest nations. This includes not only international migration, but also permanent, temporary and seasonal migrations within poorer countries, a phenomenon of considerable importance across much of Africa, Asia and Latin America.
Yet it is also clear that migration - and perhaps especially international migration - is an activity that carries significant risks and costs. As such, although migration is certainly rooted, at least in part, in income and wealth inequalities between sending and receiving areas, it does not necessarily reduce inequality in the way intended by many migrants. Much depends on the distribution of these costs and benefits, both within and between sending and receiving countries and regions. Also important in terms of the aggregate impact of migration on sending societies is the selectivity of migration itself. Clearly if most migrants were to come from the poorest sections of society, and they were to achieve net gains from migration, this would act to reduce economic inequality at least, all other things being equal. But migrants are not always the poorest, they do not always gain, and other factors are not equal.
Boix, Carles. 2004
Spain: Development, Democracy and Equity.
In the last half century Spain has undergone a dramatic and by most counts successful political and economic transformation from relative underdevelopment and authoritarianism to wealth and democracy. In the immediate aftermath of World War II, which resulted in the re-establishment of democracy in Western Europe, Spain remained a culturally and diplomatically isolated country, governed by authoritarian institutions. Moreover, whereas democratic Europe experienced a period of rapid economic growth and growing trade integration, Spain was burdened by the destruction yielded by its civil war fought in the 1930s, the pursuit of autarkic policies and a long history of relative poverty. Following the decision to liberalize its economy in the late 1950s, Spain quickly transformed into a modern manufacturing and service-based economy, experiencing unprecedented levels of prosperity, massive urbanization and a growing middle class. With the death of its dictator in 1975, Spain embarked in a peaceful transition to democracy, the construction of a broad welfare state and its integration in the European Union. This successful transition to economic and political modernity is particularly relevant, both theoretically and from the viewpoint of policymakers, because Spain stands as one of the few countries that managed to move peacefully from underdevelopment and authoritarianism to democracy and prosperity in the last decades. Most of today’s wealthy democracies (concentrated in Europe and North America) were already industrialized and had liberal political regimes by the middle of the twentieth century. With the exception of a few Asian cases and, more recently, some small Eastern European nations, the rest of the world, which was either underdeveloped, undemocratic or both a few decades ago, has still a long way to catch up with the developed West.
Moncrieffe, Joy M. 2004.
Beyond Categories: Power, Recognition and the Conditions for Equity.
The World Development Report (WDR) 2006 will reflect some important shifts in popular thinking about the relationship between inequality, growth and poverty. First, it will refute the Kuznetsian position that inequality has an invariably positive role and will, instead, assert that high levels of inequality can curtail the potential poverty-reducing impact of growth; conversely, where there is low or falling inequality, lower income groups will have a larger share of any increase in national income (Naschold 2002). Second, following Sen (1993; 1999) and others, the WDR will stress the importance of equity, arguing that poverty reflects deprivation in income and consumption, as well as in capabilities, such as health, education and civil liberties. It will maintain that individuals have differing levels of advantage, which, in addition to income, could be understood as their capability and freedom to make choices, and to convert their incomes into well-being—by establishing personal goals and having realistic means of attaining them. Therefore, it will attempt to define those policies and institutional arrangements that will supply the assets— political, social and economic—and opportunities that people in poverty need to transform their lives...
Ross, Michael. 2004.
Mineral Wealth and Equitable Development.
In theory, new mineral wealth should offer governments a chance to boost economic growth and reduce inequality. In practice, it often leads to economic stagnation, civil conflict, and heightened inequality. To avoid these problems, governments must navigate a complex series of economic, social, and political challenges. One of the most difficult challenges is deciding how to deal equitably with the regional or local communities where the extraction occurs. Both the central government and local communities typically claim ownership of the resources, dispute the other side’s claims, and have some ability to slow or block projects they dislike. Mineral firms are often caught between the two sides. When these disputes can be resolved, mineral development can proceed; when they cannot – as in Bolivia, Sudan, Indonesia, and Papua New Guinea – the result may be political unrest and violent conflict. This paper explores the problems and opportunities that governments, firms, and local communities face when they must divide the costs and benefits of a mineral development project. It makes four central arguments:
Sabates-Wheeler, Rachel. 2005
Asset Inequality and Agricultural Growth: How Are Patterns of Asset Inequality Established and Reproduced?
The purpose of this study is to explore the relationship between distributions of asset inequality, how these distributions are created and maintained, and agricultural growth. We intend to investigate what policies and institutions tend to promote equally shared growth. The motivating question that guides our study is: How does differential access to productive assets in the agricultural sector, at various levels (regional, community and household), effect inequalities in agricultural outcomes in terms of productivity and poverty? The dominant discourse on agricultural productivity and distribution has been largely technocratic, focusing on input-output relationships, defined and measured with a yardstick specific to the discipline of economics. We review certain strands of this literature in depth. A less well-known strand of literature emphasises the social and political constructions and reproductions of a variety of inequalities. While this is a relatively small literature we use it to broaden our understanding of the processes and institutions that link inequality and productivity. Furthermore, we use Ethiopian agriculture as a case study to highlight the persistent nature of inequality as causally related to historical choices and path dependency. Rather than unidirectional causalities, what we observe is a complex system whereby inequality affects growth which in turn reinforces processes that exacerbate and reproduce inequalities.
From Columbia University
The world distribution of income: falling poverty and ... convergence, period

By Xavier Sala-i-Martin - 2005

We estimate the WDI by integrating individual income distributions for 138 countries between 1970 and 2000. Country distributions are constructed by combining national accounts GDP per capita to anchor the mean with survey data to pin down the dispersion.
Poverty rates and headcounts are reported for four specific poverty lines. Rates in 2000 were between one-third and one-half of what they were in 1970 for all four lines. There were between 250 and 500 million fewer poor in 2000 than in 1970. We estimate eight indexes of income inequality implied by our world distribution of income. All of them show reductions in global inequality during the 1980s and 1990s. (*)

From Human Development Report 2005

Trends in global income distribution, 1970-2000, and Scenarios for 2015

By Y. Dikhanov - 2005

The paper builds on the author’s prior research in areas of evolution of the global income distribution and of the “quasi-exact” polynomial interpolation of density functions. The 1970-2000 estimates are augmented with two 2015 scenarios: (a) distribution-neural growth (national distributions kept constant) and (b) pro-poor growth (the poor’s income grows at twice the average rate until 2015). The scenarios are based on historical 1990-2002 trends in GDP growth and UN population projections for 2015. Compared to 2000, the distribution-neutral growth scenario for 2015 shows a decline in the Gini – 0.300, Theil 1 and 2 – 0.114 and 0.082, respectively, and a decline in absolute poverty from 1,172 mln. in 2000 to 689 mln. in 2015. These changes are explained to a large degree by the projected fast growth in India and China. The pro-poor growth scenario resulted in additional 253 mln. people rescued from poverty. Two more simulations are presented: (1) transfers being made to the poor in 2000, and (2) distribution-neutral growth occurring during 1970-2000. An annex discusses advantages of the “quasi-exact” polynomial interpolation of income distributions.

Competing Concepts of Inequality in the Globalization Debate
Martin Ravallion - World Bank - 2004

Differences in the value judgments made in measuring inequality underlie the conflicting factual claims often heard about how much poor people have shared in the economic gains from globalization. Opponents in the debate differ in:
(i) whether they weight people or countries equally in assessing the extent of inequality;
(ii) the weight they give to vertical inequalities versus horizontal inequalities and
(iii) the extent to which they care about relative inequality versus absolute inequality.
The value judgments on these issues made by both sides need greater scrutiny if the globalization debate is to move forward.

From Journal of World Systems Research, Vol 12 N. 1 2006
A. Heshmati
The World Distribution of Income and Income Inequality: A Review of the Economics Literature
This review covers a range of measures and methods frequently employed in the empirical analysis of global income inequality and global income distribution. Different determinant factors along with the quantification of their impacts and empirical results from different case studies are presented. A number of issues crucial to the study of global income inequality are also addressed. These are the concepts, measurement and decomposition of inequality, the world distribution of income and inequality measured at different levels of aggregation: global, international and intra-national. We analyze income at each of these levels, discuss the benefits and limitations of each approach and present empirical results found in the literature and compare them with those based on the World Income Inequality Database. Research on world income inequality supports increased awareness of the problem, its measurement and quantification, the identification of causal factors and policy measures that affect global income inequality.
United Nations Department of Economic and Social Affairs
Report on the World Social Situation 2005:

The Inequality Predicament
Focusing exclusively on economic growth and income generation as a development strategy is perilous as it leads to the accumulation of wealth by a few and deepens the poverty of many.
The global commitment to overcoming inequality, or redressing the imbalance between the wealthy and the poor, as clearly outlined at the 1995 World Summit for Social Development in Copenhagen and endorsed in the United Nations Millennium Declaration, is fading. Eighty per cent of the world’s gross domestic product belongs to the 1 billion people living in the developed world; the remaining 20 per cent is shared by the 5 billion people living in developing countries. Failure to address this inequality predicament will ensure that social justice and better living conditions for all people remain elusive, and that communities, countries and regions remain vulnerable to social, political and economic upheaval.
The present Report on the World Social Situation traces trends and patterns in economic and non-economic aspects of inequality and examines their causes and consequences. It focuses on the traditional aspects of inequality, such as the distribution of income and wealth, as well as inequalities in health, education, and opportunities for social and political participation. The Report also analyses the impact of structural adjustment, market reforms, globalization and privatization on economic and social indicators.
From Finance and Development - December 2005
The inequality trap
F.H.G. Ferreira and M. Walton
Market failures, inequalities, and investment inefficiency. In a world in which markets worked perfectly, investment decisions would have little to do with the income, wealth, or social status of the decision maker. However, for various reasons—mainly economic, but also political—markets are not perfect.
A girl born to a lower-caste family of nine in the slums of Dhaka has vastly different opportunities from a boy born to well-educated and affluent parents in the well-heeled neighborhoods. An AIDS orphan in rural Zimbabwe is almost certain to have fewer chances and choices in life than a compatriot born to healthy and well-educated parents in Harare. Those differences are even greater across borders: an average Swiss, American, or Japanese child born at the same instant as one in a poor, rural area of South Africa will have incomparably superior life chances.
R. Jolly - 2005
Global inequality in historical perspective
Many of us have been astounded at the increases in inequality over the very long run – the increases in inequalities among households or individuals over most of the last two centuries within countries of most regions and between the groups of richer and poorer countries. Notwithstanding the improvements in some indicators of global inequality in the last two decades due to the impressive expansion of China and India, indicators of inequalities in recent years are all much higher than they appeared a hundred or two hundred years ago. All these trends are indicated by the rise in gini coefficients between 1820 and the 1990s and by the increases in the gaps in per capita income between the highest and lowest income groups.
M. Jantti and S. Sandstrom - 2005
Trends in income inequaliy: a critical examination of the evidence in WIID2
This paper examines changes across time in within-country inequality using the most recent, and we would argue, the most appropriate data at hand, the updated World Income Inequality Database (WIID2). We attempt to find whether it is possible to find robust evidence on inequality trends. Our empirical approach is to use so-called mixed-effects models with quintile groups means as the dependent variable, observed covariates as explanatory variables and allow for (at the most detailed level) country-specific intercepts and trends. This statistical framework allows us to assess in a structured fashion the actual patterns of inequality change across the world and to start to examine if these changes can be accounted for by readily observable economic and demographic factors.
From The Institute for the Study of Labor, Bonn
The World Distribution of Income and Income inequality
A. Heshmati, August 2004
" inequality has declined due to the faster growth in India and China than the world economy but at the cost of an increased within-country inequality. The total inequality is driven by a rise in inequality between countries affecting the evolution of world income inequality. Considering the global trends in income inequality results based on the WIID database shows that inequality is volatile prior to 1970 and more stable and increasing post 1986..."
From The Institute for the Study of Labor, Bonn
Continental and sub-continental income inequality
A. Heshmati, August 2004
The regions based on available studies include Eastern Europe and former USSR, Scandinavian, Western Europe, OECD countries, small and medium sized developing countries, sub- Saharan Africa, Latin America, East Asia, South Asia, South-East Asia and Pacific.
From The Institute for the Study of Labor, Bonn
Regional income inequality in selected large countries
A Heshmati, September 2004
The countries considered here cover transition (China and Russia), developing (India) and industrialised (USA) countries. Empirical results from the literature is further complemented and compared with those obtained from the WIID data covering post 1950s.
Jean-Ives Duclos and Q. Wodon
What is "pro-poor"?
Université Laval, Quebec - 2004
Assessing whether distributional changes are « pro-poor » has become increasingly widespread in academic and policy circles. Starting from relatively general ethical axioms, this paper proposes simple graphical methods to test whether distributional changes are indeed pro-poor. Pro-poor standards are first defined. An important issue is whether these standards should be absolute or relative. Another issue is whether pro-poor judgements should put relatively more emphasis on the impact of growth upon the poorer of the poor. Having formalized the treatment of these issues, the paper describes various ways for checking whether broad classes of ethical judgements will declare a distributional change to be pro-poor.
Hong-Ghi Min
Inequality, the Price of Nontradables, and the Real Exchange Rate: Theory and Cross-Country Evidence
Poverty Reduction Group - World Bank - 2002
This paper provides theoretical and empirical evidence of a negative association between income inequality and real exchange rates. First, we build a theoretical model showing the transmission mechanism from inequality to real exchange rates. Second, we demonstrate that the theoretical argument have empirical support using cross-country data. The magnitude of association is large, significant, and robust to alternative specifications of the reduced form model and estimation methodologies. Those findings provide empirical support for PRSP since this study indicates that “equity-based growth” and “export-drive” are compatible policies. However, the robustly negative relationship between real exchange rates and inequality does not imply that dramatic redistributive policies will automatically bring real depreciation of the domestic currency, improve the external balance, and accelerate economic growth.
H. Kempf and S. Rossignol
Is Inequality Harmful for the Environment in a Growing Economy?
Université Paris-1 Panthéon Sorbonne - 2005
In this paper we investigate the relationship between inequality and the environment in a growing economy from a political economy perspective. We consider an endogenous growth economy, where growth generates pollution and a deterioration of the environment. Public expenditures may either be devoted to supporting growth or abating pollution. The decision over the public programs is done in a direct democracy, with simple majority rule. We prove that the median voter is decisive and show that inequality is harmful for the environment: the poorer the median voter relative to the average individual, the less she will tax and devote resources to the environment, preferring to support growth.
M. Lübker
Globalization and perceptions of social inequality
International Labour Office - 2004
Past decades have coincided with increasing inequality within a majority countries, and at the same time nation states have been under increasing pressure to reduce government interventions, a trend that has reduced their ability to apply redistributive policies. In addition many of the poorest countries have not gained from the potential benefits of globalization and fallen back further, increasing the gap between the poorest and the richest nations
H. Jeong and R. M. Townsend
Growth and Inequality: Model Evaluation Based on an Estimation-Calibration Strategy
University of Southern California - 2003
This paper evaluates two well-known models of growth with inequality that have explicit micro underpinnings related to household choice. With incomplete markets or transactions costs, wealth can constrain investment in business and the choice of occupation and also constrain the timing of entry into the formal financial sector. Using the Thai Socio-Economic Survey, we estimate the distribution of wealth and the key parameters that best fit cross-sectional data on household choices and wealth. We then simulate the model economies for two decades at the estimated initial wealth distribution and analyze whether the model economies at those micro-fit parameter estimates can explain the observed macro and sectoral aspects of income growth and inequality change. Both models capture important features of Thai reality. Anomalies and comparisons across the two distinct models yield specific suggestions for improved research on the micro foundations of growth and inequality.
R. Bénabou and J. Tirole
Belief in a Just World and Redistributive Politics
Princeton University and MIT - 2004
International surveys reveal wide differences between the views held in different countries concerning the causes of wealth or poverty and the extent to which people are responsible for their own fate. At the same time, social ethnographies and experiments by psychologists demonstrate individuals’ recurrent struggle with cognitive dissonance as they seek to maintain, and pass on to their children, a view of the world where effort ultimately pays off and everyone gets their just deserts. This paper offers a model that helps explain: i) why most people feel such a need to believe in a “just world”; ii) why this need, and therefore the prevalence of the belief, varies considerably across countries; iii) the implications of this phenomenon for international differences in political ideology, levels of redistribution, labor supply, aggregate income, and popular perceptions of the poor. The model shows in particular how complementarities arise endogenously between individuals’ desired beliefs or ideological choices, resulting in two equilibria. A first, “American” equilibrium is characterized by a high prevalence of just-world beliefs among the population and relatively laissez-faire policies. The other, “European” equilibrium is characterized by more pessimism about the role of effort in economic outcomes and a more extensive welfare state. More generally, the paper develops a theory of collective beliefs and motivated cognitions, including those concerning “money” (consumption) and happiness, as well as religion.
H. Rapoport and F. Docquier
The Economics of Migrants’ Remittances
From The Institute for the Study of Labor, Bonn - 2005
This chapter reviews the recent theoretical and empirical economic literature on migrants' remittances. It is divided between a microeconomic section on the determinants of remittances and a macroeconomic section on their growth effects. At the micro level we first present in a fully harmonized framework the various motivations to remit described so far in the literature. We show that models based on different motives share many common predictions, making it difficult to implement truly discriminative tests in the absence of sufficiently detailed data on migrants and receiving households' characteristics and on the timing of remittances. The results from selected empirical studies show that a mixture of individualistic and familial motives explains the likelihood and size of remittances. At the macro level we first briefly review the standard (Keynesian) and the trade-theoretic literature on the short-run impact of remittances. We then use an endogenous growth framework to describe the growth potential of remittances and present the evidence for different growth channels. We then explore the relationship between remittances and inequality. This relationship appears to be non-monotonic. This is consistent with different theoretical arguments regarding the role of migration networks and/or the dynamics of wealth transmission between successive generations.
Anton Korinek, Johan A. Mistiaen, and Martin Ravallion
Survey Nonresponse and the Distribution of Income
World Bank Research Papers - 2005
Branko Milanovic and Lyn Squire
Does tariff liberalization increase wage inequality?
Some empirical evidence

World Bank Policy Research Working Papers - 2005
Moses Shayo
Nation, Class and Redistribution: Applying Social Identity Research to Political Economy.
Princeton University - 2005
People often conceive themselves, and behave, as members of social groups. Drawing on a vast empirical literature, this paper offers a definition of social identification and an equilibrium concept where social identities are endogenously determined. We apply this framework to the political economy of redistribution in democracies, focusing on class and national identities. We present new empirical evidence that supports the main implications of the model, namely: (a) that identifying with ones nation is more likely among the poor than among the rich; (b) that controlling for income, national identification reduces support for redistribution; and (c) that across democracies there is a strong negative relationship between the prevalence of national identification and an equilibrium concept where social identities are endogenously determined. We apply this framework to the political economy of redistribution in democracies, focusing on class and national identities. We present new empirical evidence that supports the main implications
Alberto Alesina and George-Marios Angeletos
Corruption, Inequality and Fairness
Massachusetts Institute of Technology - 2005
D. Checchi and C. Garcia-Penalosa
Labour Market Institutions and the Personal Distribution of Income in the OECD
Università degli Studi di Milano - IZA - CNRS - 2005
Diego Winkelried
Income Distribution and the Size of the Informal Sector.
This paper studies the role of income distribution as a determinant of the size of the informal sector in an economy by relying on a channel whereby inequality affects the behaviour of aggregate demand and thus influences the incentives a firm has to become informal. It is further postulated that income distribution affects the response of the informal sector to different fiscal policies, either demand or supply-orientated. The main findings are that high inequality leads to a large informal sector, and that redistribution towards the middle class decreases the size of the informal sector and increases the capacity of fiscal instruments to reduce informality. Empirical evidence for Mexican cities is provided.
St John’s College, University of Cambridge - 2005
Keiji Saito
A fallacy of wage differentials:
wage ratio in distribution

Graduate School of Economics, The University of Tokyo - 2005
Santiago Budría and Pedro Telhado Pereira
Educational Qualifications and Wage Inequality:
Evidence for Europe

From The Institute for the Study of Labor, Bonn - 2005
Herwig Immervoll, Horacio Levy, Christine Lietz, Daniela Mantovani, Cathal O‘Donoghue, Holly Sutherland and Gerlinde Verbist
Household Incomes and Redistribution in the European Union:
Quantifying the Equalising Properties of Taxes and Benefits

From the Institute for the Study of Labor, Bonn - 2005
A B Atkinson and Andrew Leigh
The Distribution of Top Incomes in New Zealand
The Australian National University - 2005
Branco Milanovic
Global income inequality: what it is and why it matters?
World Bank papers - 2005
Global inequality is a relatively recent topic. The first calculations of inequality across world citizens were done in the early 1980s.2 This is because in order to calculate global inequality, one needs to have data on (within-)national income distributions for most of the countries in the world, or at least for most of the populous and rich countries. But it is only from the early- to mid-1980s that such data became available for China, 3 Soviet Union and its constituent republics and large parts of Africa. Before we move to an analysis of global inequality, however it is useful to set the stage by delineating what topics we shall be concerned with and what not...

Ales Bulir
Income Inequality: Does Inflation Matter?
IMF Staff Papers - 2001
J. Humberto Lopez and Luis Servén
The World Bank
A Normal Relationship? Poverty, Growth, and Inequality
The World Bank - 2006
Era Dabla-Norris and Paul Wade
Rent seeking and endogeneous economic inequality
IMF working paper - 2001
E.F. Fama and K. R. French
Value versus growth: the international evidence
Draft August 1997

J. Flemming and J. Micklewright, 1999
Income Distribution, Economic Systems and Transition
We consider the differences in income distribution between market and planned economies in two ways. First, using benchmarks from the OECD area we review evidence from the countries of Central and Eastern Europe and the former Soviet Union during the socialist period. Second, we look at the transitions currently being made by the latter. In each case we review available data and the problems they present before considering in turn (i) the distribution of earnings of full-time employees, (ii) the distribution of individuals’ per capita household incomes, and (iii) the ways in which the picture is altered by non-wage benefits from work, price subsidies and social incomes in kind. For the socialist period we are able to consider long series of data, often covering several decades, and we can thus show the changes in the picture of distribution under the socialist system. We also emphasize the diversity across the countries concerned. For the period of transition, itself incomplete, the series are inevitably shorter but we are able to avoid basing conclusions on evidence drawn from single years. The picture during transition, like that under socialism, is varied. Russia has experienced very sharp increases in measured inequality to well above the top of the OECD range. The Czech Republic, Hungary and Poland have seen more modest rises. We note the lack of a satisfactory analytic framework in the literature that encompasses enough features of the transition, a framework which would help interpretation of the evidence.
International Monetary Fund
Fiscal Affairs Department - December 1998
Fundamental determinants of inequality and the role of the government
By V. Tanzi
This paper discusses the fundamental determinants of inequality. These are identified as world or market forces, social norms, ownership of real and human capital, and the role of government. The change in the relative role of these factors in determining inequality during economic development is analyzed.
Inequality is much influenced by systemic factors such as social norms and attitudes, broad economic changes, and governmental activity. In closed and traditional societies, where public sector intervention is limited, social norms and attitudes are very important in determining inequality. In more open and more developed societies, the role of government and the impact of broad economic forces progressively become more important. This paper analyzes some of these aspects stressing in particular the role of social norms. It argues that in traditional or poorer societies the interconnection of real wealth with existing norms goes a long way to determine the extent of economic inequality. The opening of markets and the broad economic changes brought about by structural reforms and globalization have powerful effects on social norms.
When these trends lead to economic development, the result will be a weakening of the impact of these norms and a progressive replacement of tangible wealth with human capital as the main determinant of income. Thus, progressively, the distribution of human capital becomes more important than the distribution of real assets in determining inequality. The role of government in this process is discussed. That role is carried out through the traditional tools available to the government, namely taxes, government spending, and regulations. It is concluded that the role that the government plays in creating human capital may be the most important impact that the government can have on income distribution.

Goodman, Alissa. 2005.
The Links between Income Distribution and Poverty Reduction in Britain
The 1980s was a period of rapidly increasing income inequality in Britain, accompanied by growing numbers of individuals falling into relative income poverty. While child poverty rates - in at least the two previous decades - had been very similar to those of the rest of the population, it was over this same period that a pronounced gap began to emerge: overall poverty rates were rising but child poverty rates were increasing by an even greater amount.
Throughout the early 1990s when the growth in inequality halted, the relative position of families in the income distribution did improve, although by the time Labour came to power in 1997, child poverty still remained significantly higher than for many other population groups, and than that experienced throughout the 1960s and 1970s.
Samman, Emma. 2005a.
Openness and Growth: An Empirical Investigation
In a recent and influential study, Trade, growth and poverty, Dollar and Kraay (2001) advance the argument that trade liberalization improves the growth prospects of poor countries. They demonstrate this point principally using multiple regression analysis with data for 100 countries, through which the share of trade in an economy is shown to have had a statistically significant positive effect on income growth in the 1980s and 1990s. On the basis of this analysis, they assert that developing countries should enact more liberal trade policies to foster growth and reduce poverty.
This paper finds several errors in the conceptual logic and methodology underlying the DK study. First, it argues that the authors employ selective evidence in support of their view while overlooking their data that is open to alternative interpretations. Next, it argues that their reliance on the share of trade in GDP as an indicator of trade liberalization is highly misleading. Third, the failure to carefully consider selection bias in the descriptive analysis further distorts the results. Finally, the regression analysis contains several problems relating to the data used and specification.
———. 2005c.
Wealth for the Few, Poverty for the Many: The Resource Curse—Examples of Poor Governance/Corporate Mismanagement Wasting Natural Resource Wealth.
The Grasberg mine – Irian Jaya
U.S company Freeport McMoran hit the headlines in the mid 1990s accused of serious human rights and environmental violations in its Grasberg mine in Irian Jaya. In its annual report, Freeport acknowledges responsibility for dumping over 125,000 tons of potentially toxic tailings into the rivers of Irian Jaya every day. The mine was the world’s largest gold mine and the third largest copper mine in the world valued between $50 and %60 billion. According to reports by the BBC the mine has been responsible for the deaths of hundreds of people since the mine began operations in 1972 turning a blind eye while the Indonesian military killed and tortured dozens of native people in the area around the mining concession.
Sridhar, Devi. 2005.
Inequality in the United States Healthcare System
Although the United States (US) has been rated highly in the United Nations Human Development Index, the shining health indicators of the general population do not reflect the great disparity in the health of certain subpopulations. Absolute health indicators often make the suffering of the vulnerable, especially those living in the wealthiest nation, invisible to the world.
In this paper, I will demonstrate why the US private-public healthcare system should not be used as a model for other countries as it exacerbates the inequality in access to care and health status between the haves and the have-nots.
From the Joseph Rowntree Foundation - 30 April 2007
Poverty twice as likely for minority ethnic groups: education fails to close the gap
The poverty rate for
Britain’s minority ethnic groups stands at 40%, double the 20% found amongst white British people, according to new research published today (30 April) by the Joseph Rowntree Foundation (JRF). Minority ethnic groups are also being overlooked for jobs and are being paid lower wages, despite improvements in education and qualifications.
The research highlights the differences between minority ethnic groups with 65% of Bangladeshis living in poverty compared to 55% of Pakistanis, 45% of Black Africans and 30% of Indians and Black Caribbeans. Over half of Bangladeshi, Pakistani and Black African children in the UK are growing up in poverty with a staggering 70% of Bangladeshi children growing up poor.

UNU-WIDER - December 2006
Pioneering Study Shows Richest Two Percent Own Half World Wealth
The richest 2% of adults in the world own more than half of global household wealth according to a path-breaking study released today by the Helsinki-based World Institute for Development Economics Research of the United Nations University (UNU-WIDER).
The most comprehensive study of personal wealth ever undertaken also reports that the richest 1% of adults alone owned 40% of global assets in the year 2000, and that the richest 10% of adults accounted for 85% of the world total. In contrast, the bottom half of the world adult population owned barely 1% of global wealth.

E. M. Uslaner - 2005
The inequality trap
Successful (or “well-ordered”) democracies are marked by high levels of trust in other people and in government, low levels of economic inequality, and honesty and fairness in the public sphere. Trust in people, as the literature on social capital has shown, is essential for forming bonds among diverse groups in society... Trust in government is essential for political stability and compliance with the law. Corruption robs the economy of funds and leads to less faith in government (perhaps also to less faith in fellow citizens) and thus lower compliance with the law. And institutions seen as biased (unfair) cannot secure compliance and may exacerbate inequalities in society.
Jordi Estivill - 2003
Concepts and strategies for combating social exclusion. An overview
Social exclusion is a phenomenon of both the past and the present, and if nothing is done, it will also be one of the future. It affects millions of persons who struggle to survive in the hardest living and working conditions. Throughout history, the forms taken by exclusion have evolved, both with regard to their characteristics and the attitudes adopted towards them. Exclusion currently takes on different appearances on the various continents, and even within them, at the regional and national levels. But it affects everyone. Programmes and measures addressing its various aspects have also changed and are not the same in all four corners of the world. The actors involved do not play the same role in their desire to reduce and eradicate exclusion.
The Christian Science Monitor - August 03, 2006
New Treasury head eyes rising inequality
In his first major speech Monday, Henry Paulson pushed America's wide income gap onto the agenda.
By Mark Trumbull - Staff writer of The Christian Science Monitor
The wide gap between the richest and poorest Americans has not often been the topic of choice for the Bush administration's two previous Treasury secretaries. So it was notable this week that Henry Paulson, the president's latest Treasury head, chose to put that issue on his short list - as one of the nation's four prominent, long-term economic challenges. Mr. Paulson's head-on approach during one of his first public appearances as secretary differs from his predecessors' strategies, some analysts say.
The wealth gap is hardly new, but income inequality has been growing in America over the past quarter century. Even as average worker productivity has surged, average hourly earnings have stagnated. Meanwhile, the nation's economic elites have prospered.
René Morissette, Xuelin Zhang and Marie Drolet
The Evolution of Wealth Inequality in Canada, 1984-1999
November 2003
From the Official UK Statistics:
Social and Economic inequalities in the United Kingdom
From The Economist - 10 August 2006
Class: But did they buy their own furniture?
Class is no longer a reliable guide to anything in Britain. But it still matters
WHEN George Orwell wrote in 1941 that England was “the most class-ridden country under the sun”, he was only partly right. Societies have always had their hierarchies, with some group—Boston's Brahmins, France's énarques, the Communist Party of China—perched at the top. In the Indian state of Bihar the Ranveer Sena, an upper-caste private army, even killed to stay there. By that measure class in Britain hardly seems entrenched. But in another way Orwell was right, and continues to be. As a new YouGov poll for The Economist shows, Britons are surprisingly alert to class—both their own and that of others.
From The Institute for the Study of Labor, Bonn
Poverty persistence in Sweden
J. Hamsem and R. Wahlberg, July 2004
Jesper Roine and Daniel Waldenström
Top Incomes in Sweden over the Twentieth Century

Stockholm School of Economics - 2005
United Nations University
World Institute for Development Economic Research:

Stefan Dercon and John Hoddinott:
Health, Shocks and Poverty Persistence

In this paper we review the evidence on the impact of large shocks, such as drought, on child and adult health, with particular emphasis on Zimbabwe and Ethiopia. Our focus is on the impact of shocks on long-term outcomes, and we ask whether there are intrahousehold differences in these effects. The evidence suggests substantial fluctuations in body weight and growth retardation in response to shocks. While there appears to be no differential impact between boys and girls, adult women are often worse affected by these shocks. For children, there is no full recovery from these losses, affecting adult health and education outcomes, as well as lifetime earnings. For adults, there is no evidence of persistent effects from transitory shocks in our data.

DP2003/25 Kym Anderson:
Trade Liberalization, Agriculture, and Poverty in Low-income Countries
This paper offers an economic assessment of the opportunities and challenges provided by the WTO’s Doha Development Agenda, particularly through agricultural trade liberalization, for low-income countries seeking to trade their way out of poverty. After discussing links between poverty, economic growth and trade, it reports modelling results showing that farm product markets remain the most costly of all goods market distortions in world trade. It focuses on what such reform might mean for countries of South Asia and sub-Saharan Africa in particular, both without and with their involvement in the MTN reform process. What becomes clear is that if those countries want to maximize their benefits from the Doha round, they need also to free up their own domestic product and factor markets so their farmers are better able to take advantage of new market-opening opportunities abroad. Other concerns of low-income countries about farm trade reform also are addressed: whether there would be losses associated with tariff preference erosion, whether food-importing countries would suffer from higher food prices in international markets, whether China’s WTO accession will provide an example of trade reform aggravating poverty via cuts to prices received by Chinese farmers, and the impact on food security and poverty alleviation. The paper concludes with lessons of relevance for low-income countries for their own domestic and trade policies.

Giovanni Andrea Cornia and Tony Addison with Sampsa Kiiski:
Income Distribution Changes and their Impact in the Post-World War II Period

This paper analyses the trends in within-country inequality during the post-World War II period, with particular attention to the last 20 years. This is done on the basis of a review of the relevant literature and of an econometric analysis of inequality trends in 73 countries, which account for 80 per cent of the world’s population and 91 per cent of world GDP-PPP. The paper suggests that the last two decades have been characterized by a surge in within-country inequality in about two-thirds of the developing, developed and transitional nations analysed. It also suggests that in those countries where the upsurge in inequality was sizeable or where inequality rose from already high levels, growth and poverty alleviation slowed down perceptibly. While this trend towards higher inequality differs substantially across countries in its extent, timing and specific causes, it marks a clear departure from the pattern observed during the first 30 years of the post-World War II period during which a widespread move towards greater egalitarianism was noted in the majority of the socialist, developing and industrialized economies, with the exception of Latin America and parts of Sub-Saharan Africa.

Kræn Blume, Björn Gustafsson, Peder J. Pedersen and Mette Verner:
A Tale of Two Countries: Poverty among Immigrants in Denmark and Sweden since 1984
The paper focuses on the problems of low income among immigrants, analysed by using comparable panel datasets for two Scandinavian welfare states. After a brief survey of a few earlier studies on immigrant poverty, we present Denmark and Sweden as interesting cases for comparative research. Cyclical profiles have been very different since the 1980s and both countries have experienced considerable differences with regard to the number and composition of immigrants from the less developed countries. Poverty rates, analysed relative to different background factors, are fairly high, in particular when considering the welfare state background of Denmark and Sweden. A number of differences are found in spite of the institutional similarities between the two countries.

Chris Elbers, Peter Lanjouw, Johan Mistiaen, Berk Özler and Ken Simler:**
Are Neighbours Equal? Estimating Local Inequality in Three Developing Countries (PDF 340KB)

Ruslan Yemtsov:**
Quo Vadis? Inequality and Poverty Dynamics across Russian Regions (PDF 439KB)

Michael Forster, David Jesuit and Timothy Smeeding:**
Regional Poverty and Income Inequality in Central and Eastern Europe: Evidence from the Luxembourg Income Study (PDF 251KB)

Almas Heshmati:
Measurement of a Multidimentional Index of Globalization and its Impact on Income Inequality
In recent years, theoretical research on the link between globalization and world inequality has been intense. However, analysis of the link at the empirical level is scarce. The causal connections between globalization and inequality in developing nations are best understood by building on what we have learned about inequality change during the pre-globalization phase. Extensive empirical research points to two stylized facts. First, there is no structural relationship between growth and inequality. Second, income inequality levels in the pre-globalization phase were generally immobile and trendless.

Stanislav Kolenikov and Anthony Shorrocks:**
A Decomposition Analysis of Regional Poverty in Russia (PDF 326KB)

Bart Capéau and André Decoster:**
The Rise or Fall of World Inequality: A Spurious Controversy? (PDF 233KB)

DP2004/01 Anthony Shorrocks and Guanghua Wan:**
Spatial Decomposition of Inequality (PDF 200KB)

DP2004/04 Erik Thorbecke:**
Conceptual and Measurement Issues in Poverty Analysis (PDF 211KB)

RP2004/01 Anthony Shorrocks:**
Inequality and Welfare Evaluation of Heterogeneous Income Distributions (PDF 457KB)

RP2004/12 S. Subramanian:**
Poverty Measures and Anti-Poverty Policy with an Egalitarian Constraint (PDF 217KB)

RP2004/11 S. Subramanian:**
Some Simple Analytics of Poverty Redress through Direct Income Transfers and Wage Employment Programmes: A Review and Commentary (PDF 231KB)

RP2004/10 S. Subramanian:**
A Re-scaled Version of the Foster-Greer-Thorbecke Poverty Indices based on an Association with the Minkowski Distance Function (PDF 167KB)

RP2004/26 Ann Harding, Rachel Lloyd, Anthea Bill, and Anthony King**
Assessing Poverty and Inequality at a Detailed Regional Level: New Advances in Spatial Microsimulation (PDF 624KB)

RP2004/25 S. Subramanian:**
Indicators of Inequality and Poverty (PDF 272KB)

RP2004/33 Susan Harkness:**
Social and Political Indicators of Human Well-being (PDF 254KB)

RP2004/31 Douglas A. Hicks:
Inequalities, Agency, and Well-being: Conceptual Linkages and Measurement Challenges in Development - (PDF 177KB)

The capabilities approach has emphasized that inequalities can be analyzed in various dimensions of human functioning. Indicators of these inequalities can be incorporated into assessments of well-being. The capabilities approach also highlights the intrinsic importance of agency and demonstrates empirically that agency is instrumentally valuable for achieving various functionings. This paper draws together these discussions to delineate the relationships among inequalities, agency, and well-being of disadvantaged persons. A person’s relative deprivation (e.g., being illiterate or being in ill-health) negatively affects her well-being and contributes to her lack of agency. Conversely, some (but not all) expressions of agency by disadvantaged persons can help reduce inequalities. This model provides a complex understanding of the dynamics of deprivation—and its alleviation. The paper closes by considering ways agency and inequalities could be incorporated alongside well-being into indicators of development.

RP2004/30 Andrew Sumner:**
Economic Well-being and Non-economic Well-being: A Review of the Meaning and Measurement of Poverty (PDF 227KB)

RP2004/29 Mariano Rojas:**
Well-being and the Complexity of Poverty: A Subjective Well-being Approach (PDF 243KB)

RP2004/41 Sara Lelli:**
What Money Can’t Buy: The Relevance of Income Redistribution for Functioning Levels (PDF 353KB)

RP2004/40 Oleksiy Ivaschenko:**
Longevity in Russia’s Regions: Do Poverty and Low Public Health Spending Kill? (PDF 630KB)

RP2004/38 Nicholas Minot and Bob Baulch:**
Poverty Mapping with Aggregate Census Data: What is the Loss in Precision? (PDF 476KB)

RP2004/37 Mozaffar Qizilbash:**
On the Arbitrariness and Robustness of Multi-Dimensional Poverty Rankings (PDF 228KB)

RP2004/57 Sarah White and Jethro Pettit:**
Participatory Approaches and the Measurement of Human Well-being (PDF 165KB)

RP2004/59 S. Subramanian:**
Social Groups and Economic Poverty: A Problem in Measurement (PDF 148KB)

RP2004/63 Mark McGillivray and Farhad Noorbakhsh:**
Composite Indices of Human Well-being: Past, Present, and Future (PDF 167KB)

DP2004/07 Ruut Veenhoven:**
Subjective Measures of Well-being(PDF 250KB)

DP2004/06 Des Gasper:**
Human Well-being: Concepts and Conceptualizations (PDF 291KB)

DP2004/05 Stephan Klasen:**
Gender-Related Indicators of Well-Being (PDF 253KB)

RP2005/46 Indranil Dutta and Ajit Mishra:**
Inequality, Corruption, and Competition in the Presence of Market Imperfections (PDF 247KB)

RP2005/57 Ethan Ligon:**
Poverty and the Welfare Costs of Risk Associated with Globalization (PDF 213KB)

RP2005/59 S. Subramanian:**
Reckoning Inter-group Poverty Differentials in the Measurement of Aggregate Poverty (PDF 264KB)

RP2005/64 Bram Thuysbaert and Ricardas Zitikis:**
Consistent Testing for Poverty Dominance (PDF 237KB)

Rafael E. De Hoyos**
The Microeconomics of Inequality, Poverty and Market Liberalizing Reforms (PDF 472KB)
This paper illustrates how the use of microeconometric techniques can be used to uncover the micro dynamics behind macro shocks. Using Mexican micro data we find out that—controlling for everything else—between 1994 and 1998 returns to personal characteristics in the tradable sector increased particularly those of skilled labourers. By the year 2000 the positive shock upon the tradeable sector vanishes with returns to personal characteristics converging to the levels observed in the non-tradable sector. We use our model’s results to simulate a scenario where the Mexican economy experienced the negative shock of the peso crises in the absence of trade liberalization (NAFTA) and find out that under such a scenario the poverty headcount ratio would have increased more than 2 percentage points above the one observed in 1996. The simulated secondorder effect of these changes shows that the skill mixed changed in a way that favoured relatively skilled men and relatively unskilled women. These changes in labour participation and occupation had an overall positive income effect though adverse in distributive terms.

RP2005/62 S. Subramanian:**
Poverty Measurement and Theories of Beneficence (PDF 151KB)

RP2005/75 George Mavrotas and S. Mansoob Murshed:**
The Poverty Macroeconomic Policy Nexus: Some Short-run Analytics (PDF 203KB)

RP2005/40 Rhys Jenkins:**
Globalization, Production and Poverty (PDF 128KB)

RP2005/02 Alain Chateauneuf and Patrick Moyes:**
Measuring Inequality Without the Pigou–Dalton Condition (PDF 363KB)

DP2005/03 Rehman Sobhan:**
A Macro Policy for Poverty Eradication through Structural Change (PDF 84KB)

DP2005/08 Machiko Nissanke and Erik Thorbecke:**
Channels and Policy Debate in the Globalization-Inequality-Poverty Nexus (PDF 219KB)

RP2005/41 Jinhua Zhao:**
The Role of Information in Technology Adoption under Poverty (PDF 166KB)

RP2005/37 Almas Heshmati:**
The Relationship between Income Inequality, Poverty, and Globalization (PDF 194KB)

RP2005/36 Adriaan Kalwij and Arjan Verschoor:**
A Decomposition of Poverty Trends across Regions: The Role of Variation in the Income and Inequality Elasticities of Poverty (PDF 751KB)

RP2005/34 Indranil Dutta and Ajit Mishra:**
Does Inequality lead to Conflict? (PDF 273KB)

RP2005/33 Carol Graham:**
Globalization, Poverty, Inequality, and Insecurity: Some Insights from the Economics of Happiness (PDF 184KB)

RP2005/32 Kaushik Basu:**
Globalization, Poverty and Inequality: What Is the Relationship? What Can Be Done? (PDF 111KB)

RP2005/30 Pranab Bardhan:**
Globalization and Rural Poverty (PDF 94KB)

RP2005/29 Martin Ravallion:**
Looking Beyond Averages in the Trade and Poverty Debate (PDF 252KB)

RP2005/28 Rimjhim M. Aggarwal:**
Globalization, Local Ecosystems, and the Rural Poor (PDF 103KB)

RP2005/27 Gregory Graff, David Roland-Holst, and David Zilberman:**
Biotechnology and Poverty Reduction in Developing Countries (PDF 133KB)

RP2005/22 Matthew Clarke:**
Assessing Well-being Using Hierarchical Needs(PDF 119KB)

Daniel T. Haile:
Wealth Distribution, Lobbying and Economic Growth: Theory and Evidence
This paper presents a model allowing one to analyze the joint determination of inequality, taxes, human capital and growth. We consider the political economy of redistribution between three income groups in a dynamic economy. The paper seeks to explain the effect of corruptibility (exemptions) and lobby group size on policy outcomes. Theoretically, this paper provides a linkage between lobbying activities, wealth distribution and growth. By endogenizing the weights the social planner gives to their constituents, our analysis explains why the relationship between redistribution and inequality is non-monotonic. In particular, the theory predicts a non-monotonic relation between the level of education, taxation and growth. Our empirical results, moreover, confirm the conjectured effect that in economies with a higher degree of corruption and inequality, we observe a lower tax/GDP ratio, leading to a lower development of human capital and thus lower growth.

DP2006/06 Markus Jäntti, Juho Saari, and Juhana Vartiainen:**
Growth and Equity in Finland (PDF 273KB)

RP2006/64 Lars Osberg and Kuan Xu:**
How Should We Measure Global Poverty in a Changing World? (PDF 246KB)

RP2006/45 M. S. Qureshi:**
Trade Liberalization, Environment and Poverty: A Developing Country Perspective (PDF 369KB)

RP2006/38 Melanie Grosse, Kenneth Harttgen, and Stephan Klasen:**
Measuring Pro-Poor Progress towards the Non-Income Millennium Development Goals (PDF 346KB)

Eric M. Uslaner:
Corruption and Inequality
Economic inequality provides a fertile breeding ground for corruption and, in turn, leads to further inequalities. Most corruption models focus on the institutional determinants of government dishonesty. However, such accounts are problematic. Corruption is remarkably sticky over time. There is a very powerful correlation between cross national measures corruption in 1980 and in 2004. In contrast, measures of democracy such as the Freedom House scores are not so strongly correlated over time, and changes in corruption are unrelated to changes in institutional design. On the other hand, inequality and trust-like corruption are also sticky over time. The connection between inequality and the quality of government is not necessarily so simple. The aggregate relationships between inequality and corruption are not strong. The path from inequality to corruption may be indirect, through generalized trust, but the connection is key to understanding why some societies are more corrupt than others. This study estimates a simultaneous equation model of trust, corruption, perceptions of inequality, confidence in government, and demands for redistribution in Romania, and shows that perceptions of rising inequality and corruption lead to lower levels of trust and demands for redistribution.

Richard Jolly:
Inequality in Historical Perspective
Adam Smith, Tom Paine, John Stuart Mill and Karl Marx were all bold and outspoken about the injustices of extreme inequality, nationally and internationally. Yet by almost every standard, global inequality has grown substantially since they were writing, and national income inequality also over the last two or three decades. There is a case today for more outspokenness about the extremes of inequality, both about the causes and how these causes are linked to extreme injustices in the past.

Farhad Noorbakhsh:
International Convergence or Higher Inequality in Human Development? Evidence for 1975 to 2002
The concept of convergence is extended to the human development index. Evidence of weak absolute convergence is found over 1975-2002. The results are robust and verified by various conditional β-convergence models and also supported by the evidence of weak σ-convergence. Population weighted analyses provide support for polarization in the human development index amongst developing countries but a slight reduction in world inequality. The dynamics of regional analysis reveal a movement of sub-Saharan Africa towards the low band of human development with Asia and Latin America making progress. High immobility of the early part of the period is followed by considerable upward and downward mobility in the latter part indicating a possible case of the ‘twin peaks’ type of polarization.

Giovanni Andrea Cornia and Leonardo Menchini:
Health Improvements and Health Inequality during the Last 40 Years
This paper juxtaposes changes over the last forty years in income growth and distribution with the mortality changes recorded at the aggregate level in about 170 countries and at the individual level in 26 countries with at least two demographic and health surveys covering the last twenty years. Over the 1980s and 1990s, the infant mortality rate, under-5 mortality rate, and life expectancy at birth mostly continued the favourable trends that characterized the 1960s and 1970s. Yet, especially in the 1990s, the pace of health improvement was slower than that recorded during the prior decades. In addition, the distribution between countries of aggregate health improvements became markedly more skewed. These trends are in part explained by the negative changes recorded in sub-Saharan Africa and Eastern Europe, but are robust to the removal of the two regions from the sample. This tendency is observed also at the intraregional level, with the exception of Western Europe. Thirdly, demographic and …/

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