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Income Inequality in an Era of Globalisation: The Perils of Taking a Global View

Ranjan Ray and Parvin Singh

No 08-19, Monash Economics Working Papers from Monash University, Department of Economics

Abstract: The period spanned by the last decade of the 20th century and the first decade of the 21st century has been characterised by political and economic developments on a scale rarely witnessed before over such a short period. This study on inequality within and between countries is based on a data set constructed from household unit records in over 80 countries collected from a variety of data sources and covering over 80 % of the world’s population. The departures of this study from the recent inequality literature include its regional focus within a ‘world view’ of inequality leading to evidence on difference in inequality magnitudes and their movement between continents and countries. Comparison between the inequality magnitudes and trends in three of the largest economies, China, India, and the USA is a key feature of this study. The use of household unit records allowed us to go beyond the aggregated view of inequality and provide evidence on how household based country and continental representations of the income quintiles have altered in this short period. A key message of this exercise in that, in glossing over regional differences, a ‘global view’ of inequality gives a misleading picture of the reality affecting individual countries located in different continents and with sharp differences in their institutional and colonial history. In another significant departure, this study compares the intercountry and global inequality rates between fixed and time varying PPPs and reports that not only do the inequality magnitudes vary sharply between the two but, more significantly, the trend as well. For example, the consensus on decline in global inequality based on time invariant PPPs is not sustained once we move to time varying PPPs as suggested by the ‘Penn effect’.

Keywords: PPP; Gini Coefficient; Income Inequality; Global Income Shares; Penn effect. (search for similar items in EconPapers)
JEL-codes: E01 E13 E31 F15 F61 F63 I31 O15 (search for similar items in EconPapers)
Pages: 118 pages
Date: 2019-06
New Economics Papers: this item is included in nep-cwa, nep-his and nep-mac
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