Description
Week 3 Discussion: Is It Possible To Illuminate the Extreme Poverty?
After you have read all the materials associated with this week’s topic, you probably have formulated your personal opinion about this issue: is it possible to diminish the extreme poverty in the near future?
For this discussion, express your opinion from one of the sides: “Yes, we can diminish poverty and income inequality” or “No, we cannot” as it was presented in the Harf and Lombardi material. Please provide arguments explaining your position.
If both opinions are present in the discussion, we will have a real debate on the issues of poverty and income inequality.
Please remember that all submitted posts: essays, discussion forum and journal reflection posts you can use in your Final Research paper. Please save all your posts.
Discussion Expectations
Visit the Forum site at least twice a week during two different days of this week and make a minimum of two direct responses to your peers. The responses should be well thought out and present relative information that has not already been posted.
Post a minimum of two responses to your peers and show where you agree or disagree with their analysis and explain why. Be sure your posts are relative and succinct.
As I read each week’s posts, I will be looking at the content of the posting as well as the overall subject matter. I am looking for quality of the post vs. the quantity of words of your posts.
Readings
Dincer, KAYA Halil. “The Global Crisis and Poverty.” Studies in Business & Economics, vol. 13, no. 3, Dec. 2018, pp. 63–73. EBSCOhost, doi:10.2478/sbe-2018-0035.
Sumner, Andy. “Global Poverty and Inequality: Change and Continuity in Late Development.” Development & Change, vol. 50, no. 2, Mar. 2019, pp. 410–425. EBSCOhost, doi:10.1111/dech.12487.
Note: Please make sure to click on “PDF Full Text” to access the whole article
Video
25 Sobering Statistics on Global Poverty (4:14)
Everyone knows there is poverty in the world. But what exactly does that mean? These are 25 sobering statistics on global poverty.
Unformatted Attachment Preview
Studies in Business and Economics no. 13(3)/2018
DOI 10.2478/sbe-2018-0035
SBE no. 13(3) 2018
THE GLOBAL CRISIS AND POVERTY
KAYA Halil Dincer
Northeastern State University, United States
Abstract:
In this study, we examine the impact of the 2008-2009 Global Crisis on poverty rates
across the globe. Our results are mixed. We find that, after the crisis, there was a marginally
significant increase in the number of the poorest group of people (living on less than $1.25 a day
at 2005 international prices) across the world. However, we do not find any significant increase
in the number of people in the other low-income categories (living on less than $2, $2.50, $4, or
$5). Although we do not find any significant increase in the poverty headcount ratios (the
percentage of poor people in the population living on less than $1.25, $2, $2.50, $4, or $5), our
results show that, interestingly, there has been a significant decrease in the national poverty
headcount ratios (percentage of people living below the national poverty line which is based on
estimates from household surveys) after the crisis. Overall, we suggest policymakers to focus on
the poorest group of people during these hard times since this group is affected the most.
Key words: economic crisis, financial crisis, poverty
1. Introduction
In this study, we examine the impact of the 2008-2009 Global Crisis on poverty
rates across the globe. We look into how the crisis has affected the number of the poor
(using different measures of poorness) and the poverty headcount ratios.
Several studies (i.e. Dhanani and Islam (2002), Skoufias and Suryahadi
(2000), Zin (2002), and others) examine the impact of economic/financial crises on
poverty. These studies generally show that an economic or financial crisis increases
poverty levels. These studies are narrow in scope though. They focus on certain
countries or regions rather than examining the whole globe.
In this study, we make two main contributions. First, we do not focus on a
particular country or region. Our study covers 173 countries across the globe. By using
a more comprehensive dataset, we are hoping to draw more generalized conclusions
when compared to the previous studies.
Second, we use several different measures of poverty and poverty headcount
ratio. We use measures that use certain dollar amounts as the poverty line. We also
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Studies in Business and Economics no. 13(3)/2018
use the national poverty lines that are established using household surveys. Using
several different measures of poverty will allow us to make a stronger statement
regarding the relationship between an economic/financial crisis and poverty.
We believe that the results found in this study will shed a new light on the
relation between economic/financial crises and poverty. We expect to make policy
recommendations that would reduce the negative impact of crises on populations with
low income.
The paper proceeds as follows: Section 2 reviews the previous literature.
Section 3 states our hypotheses. Section 4 explains the data and the methodology.
Section 5 shows the empirical results. Finally, Section 6 concludes.
2. Literature Review
Some of the previous research examines the relation between
economic/financial crises and human development in general. These studies find that
economic/financial crises negatively affect human development.
Both De Pee et al. (2000) and Block et al. (2004) examine the impact of the
1997/1998 crisis on Indonesia. Both studies find that the crisis affected nutrition and
health negatively in that country.
Fouere et al. (2000) and MartinBoth studies examine the effects of currency devaluation on dietary change and
nutritional vulnerability. These studies find a decline in the quality of nutrition.
Other studies examine the impact of the 2008 crisis. Brinkman et al. (2010)
find that the crisis affected young children, pregnant and lactating women, and the
chronically ill people the most. De Pee et al. (2010) find that the 2008 global economic
crisis, commodity price hikes, and climate change have had the worst impact on the
poor. Darnton-Hill and Cogill (2010) show that rising food prices affect the poor the
most.
Tiwari and Zaman (2010) show that the 2008 crisis inreased
undernourishment. Breisinger et al. (2011) show that the 2008 crisis slowed the
economy in Yemen and this, along with the food crisis, made poverty effects worse.
Nikoloski and Ajwad (2013) examine the impact of the 2009 crisis on Russia. They find
that the crisis resulted in less spending on healthcare services and that the most
vulnerable people altered their health and nutrition behavior.
West and Mehra (2010) argue that economic crises affect both dietary
quality/diversity and adequacy of vitamin A. Similarly, Thorne-Lyman et al. (2010)
examines the impact of food price increases on micronutrient deficiencies and child
malnutrition in Bangladesh. Wodon and Zaman (2010) argue that reducing import
tariffs on food is not a good idea because it would likely benefit the non-poor, rather
than the poor. Webb and Block (2012) argue that structural transformation in a country
improves nutrition, especially in rural areas.
Bloem, Semba, and Kraemer (2010) contends that governments should
emphasize nutrient-rich food instead of calorie-rich food. Christian (2010) examines the
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Studies in Business and Economics no. 13(3)/2018
impact of economic crises on childhood mortality. The author recommends that, in
order to reduce child mortality, nutritional and health surveillance data are urgently
needed.
Other than these studies that relate crises to human development, there are
several other papers that directly examine the relation between economic/financial
crises and poverty. These studies generally find crises have a significant negative
impact on poverty and poverty gap.
Skoufias and Suryahadi (2000) find that there was a big drop in household
welfare during the crisis in the 1990s. They find that the average per capita decreased
and inequality increased after the crisis. The authors contend that the poverty rate
doubled from the pre-crisis level. Said and Widyanti (2002) examine the impact of the
1997/1998 crisis on poverty and inequality in Indonesia. The authors find that the
poverty rate increased due to the crisis. They show that rural poverty increased more
than urban poverty during this crisis.
Dhanani and Islam (2002) examine the impact of the 1997 crisis on poverty in
Indonesia. The authors point out the importance of a
net. Fallon and Lucas (2002) explained the financial crises in 1990s. The authors
contend that the countries that had the largest currency depreciations suffered the
most.
Suryahadi and Sumarto (2003) examined Indonesia and find that the level of
vulnerability to poverty increased due to the crisis in 1997/1998. Suryahadi, Sumarto
and Pritchett (2003) examine the impact of the 1997 crisis on Indonesia. They show
that the poverty rate increased from fifteen percent at the onset of the crisis to thirtythree percent at the end of 1998.
Zin (2005) goes over the previous papers that examine the impact of the Asian
Crisis on Asian countries. Zin (2005) points out to the fact that the Asian Crisis affected
the uneducated, the inexperienced, the young female workers, and the urban sector
the most. The author explains that while in some countries, the rural and agriculture
sectors suffered more than the urban sectors, in other countries, it was the opposite.
2010) examine the impact of the 2008 global crisis
on Pakistan. They show that poverty headcount ratio increased by almost eighty
percent. They show that, after the crisis, interestingly, there were wage increases for
farm workers and wage reductions for skilled labor. Habib et al. (2010) examine the
impact of the crisis on poverty in Bangladesh, Mexico, and the Philippines. The authors
find that there was a significant increase in poverty. According to the authors, the crisis
has hit the middle-income households the hardest.
Sobrevinas, De Jesus and Reyes (2010) examine the impact of the crisis on
poverty in the Philippines. They find that there was a modest increase in poverty. They
show that the crisis affected some specific sectors in the economy. The degree of
impact also varies among different groups of households. Breisinger et al. (2011) show
that the 2008 crisis impacted Yemen because of the drop in oil prices and reduction in
remittances. They find that poverty in this country increased by eight percentage points
due to the crisis. Suryahadi, Hadiwidjaja and Sumarto (2012) examine the relationship
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Studies in Business and Economics no. 13(3)/2018
between economic growth and poverty reduction in Indonesia before and after the
Asian financial crisis. They show that the crisis slowed the improvement in poverty in
this country.
3. Hypotheses
In line with the previous literature on economic/financial crises and human
development, we expect the number of poor people to increase after an economic
crisis. Therefore, we expect the number of poor people to increase after the 2008-2009
Global Crisis. Our first hypothesis is as follows:
Hypothesis 1: The number of poor people across the globe had increased after
the global crisis.
We expect to see a similar increase in the poverty headcount ratios after an
economic crisis. Therefore, our second hypothesis is:
Hypothesis 2: The poverty headcount ratios across the globe had increased
after the global crisis.
The next section explains our data and methodology.
4. Data and Methodology
In this study, we examine the impact of the 2008-2009 Global Crisis on poverty
poverty-related data, so we use these data in our analyses. This dataset has poverty
data on 173 countries across the globe.
Our variables and their definitions are as follows:
NOPONE (Number of poor at $1.25 a day (PPP) (millions)):
Number of the poor population in millions living on less than $1.25 a day at
2005 international prices.
NOPTWO (Number of poor at $2 a day (PPP) (millions)):
Number of the poor population in millions living on less than $2 a day at 2005
international prices.
NOPTWOFIVE (Number of poor at $2.50 a day (PPP) (millions)):
Number of the poor population in millions living on less than $2.50 a day at
2005 international prices.
NOPFOUR (Number of poor at $4 a day (PPP) (millions)):
Number of the poor population in millions living on less than $4 a day at 2005
international prices.
NOPFIVE (Number of poor at $5 a day (PPP) (millions)):
Number of the poor population in millions living on less than $5 a day at 2005
international prices.
DDAY (Poverty headcount ratio at $1.25 a day (PPP) (% of population)):
Population below $1.25 a day is the percentage of the population living on less
than $1.25 a day at 2005 international prices.
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Studies in Business and Economics no. 13(3)/2018
TWODAY (Poverty headcount ratio at $2 a day (PPP) (% of population)):
Population below $2 a day is the percentage of the population living on less
than $2 a day at 2005 international prices.
TWOFIVEDAY (Poverty headcount ratio at $2.50 a day (PPP) (% of pop.)):
Population below $2.50 a day is the percentage of the population living on less
than $2.50 a day at 2005 international prices.
FOURDAY (Poverty headcount ratio at $4 a day (PPP) (% of pop.)):
Population below $4 a day is the percentage of the population living on less
than $4 a day at 2005 international prices.
FIVEDAY (Poverty headcount ratio at $5 a day (PPP) (% of pop.)):
Population below $5 a day is the percentage of the population living on less
than $5 a day at 2005 international prices.
NAHC (Poverty headcount ratio at national poverty lines (% of pop.)):
National poverty headcount ratio is the percentage of the population living
below the national poverty lines. National estimates are based on population-weighted
subgroup estimates from household surveys.
NAHCNC (Poverty headcount ratio at national poverty lines (% of pop.),
including noncomparable values:
National poverty headcount ratio is the percentage of the population living
below the national poverty lines. National estimates are based on population-weighted
subgroup estimates from household surveys.
In the next section, we compare the pre-crisis period to the post-crisis period.
We take the pre-crisis period as the three-year period before the crisis started (i.e.
2005-2007). Similarly, we take the post-crisis period as the three-year period after the
crisis ended (i.e. 2010-2012). Then, using non-parametric tests (only the results of the
Mann-Whitney-Wilcoxon tests are reported), we compare the pre-crisis period to the
post-crisis period.
5. Empirical Results
NOPONE, NOPTWO, NOPTWOFIVE, NOPFOUR, and NOPFIVE) over time. Figure 1
graphically shows the variation in these variables over time.
Table 1 (and also Figure 1) shows that all five variables went down until 2007,
started.
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Studies in Business and Economics no. 13(3)/2018
(i.e. DDAY, TWODAY, TWOFIVEDAY, FOURDAY, FIVEDAY, NAHC, and NAHCNC)
over time. Figure 2 and Figure 3 graphically show the variation in these variables over
time.
Table 2 (and also Figures 2 and 3) shows that all seven variables went down
ratio
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Studies in Business and Economics no. 13(3)/2018
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Studies in Business and Economics no. 13(3)/2018
changed due to the crisis, we run non-parametric tests (i.e. Mann-Whitney-Wilcoxon).
Using these tests, we compare the pre-crisis period (i.e. the 2005-2007 period) to the
post-crisis period (i.e. the 2010-2012 period).
significant. Only the change in NOPONE was marginally significant (p=0.1029).
NOPONE, NOPTWO, and NOPFIVE values were slightly higher in the 2010-2012
period when compared to the 2005-2007 period, but the difference is not statistically
significant. Only, the change in NOPONE was marginally significant. NOPTWOFIVE
and NOPFOUR values were slightly higher in the 2005-2007 period when compared to
the 2010-2012 period.
had changed due to the crisis, we run non-parametric tests (i.e. Mann-WhitneyWilcoxon). Using these tests, we compare the pre-crisis period (i.e. the 2005-2007
period) to the post-crisis period (i.e. the 2010-2012 period) in Table 4.
Table 4 shows that the change in five of these variables (i.e. DDAY, TWODAY,
TWOFIVEDAY, FOURDAY, and FIVEDAY) was not statistically significant. There was
a slight increase in variable DDAY from pre-crisis to post-crisis, and there was a slight
decrease in the other four variables from pre-crisis to post-crisis, but none of these
changes are statistically significant.
On the other hand, the change in NAHC and NAHCNC are both significant at
1% level. The median value of NAHC is 26.60% pre-crisis. The corresponding value is
only 21.90% post-crisis. This drop is significant at 1% level (p=0.0076). Similarly, the
median value of NAHCNC is 25.85% pre-crisis. The corresponding value is only
21.90% post-crisis. This drop is also significant at 1% level (p=0.0081). Interestingly,
these tests show that the poverty headcount ratio at national poverty lines actually
declined after the crisis.
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Studies in Business and Economics no. 13(3)/2018
6. Conclusion
In this study, we examine the impact of the 2008-2009 Global Crisis on poverty
rates across the globe. We examine the 2005-2012 period and classify the three-year
period before the crisis (i.e. the 2005-2007 period) as the pre-crisis period and the
three- year period after the crisis (i.e. the 2010-2012 period) as the post-crisis period.
data on 173 countries across the globe.
We look into three g
the poor population living on less than $1.25, $2, $2.50, $4, or $5 a day at 2005
living on less than $1.25, $2, $2.50, $4, or $5 a day at 2005 international prices), and
living below the national poverty lines which are based on population-weighted
subgroup estimates from household surveys).
Our results are mixed. When we look at the first group of variables, we find
that, after the crisis, there was a marginally significant increase in the number of the
poorest group of people (living on less than $1.25 a day at 2005 international prices)
across the world. However, we do not find any significant increase in the number of
people in the other low-income categories (living on less than $2, $2.50, $4, or $5).
When we look at the second group of variables, we do not find any significant
increase in the poverty headcount ratios (the percentage of poor people in the
population living on less than $1.25, $2, $2.50, $4, or $5).
When we look at the third group of variables, interestingly, we find that there
has been a significant decrease in the national poverty headcount ratios (percentage of
people living below the national poverty line which is based on estimates from
household surveys) after the crisis.
Overall, our results show that the global crisis had affected the poorest group
of people the most. Therefore, we suggest policymakers to focus on this group of
people the most during these hard times.
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Studies in Business and Economics no. 13(3)/2018
7. References
Global economic crisis and poverty in Pakistan,
International Journal of Microsimulation, Vol. 3, no. 1, pp. 127-129.
Block, S. A., Kiess, L., Webb, P., Kosen, S., Moench-Pfanner, R., Bloem, M. W., and Timmer, C.
P., (2004),
,
Economics & Human Biology, Vol. 2, no. 1, pp. 21-44.
Bloem, M. W., Semba, R. D., and Kraemer, K., (2010), Castel Gandolfo Workshop: An
introduction to the impact of climate change, the economic crisis, and the increase in
the food prices on malnutrition, The Journal of Nutrition, Vol. 140, no. 1, pp. 132S-135S.
Breisinger, C., Diao, X., Collion, M. H., and Rondot, P., (2011), Impacts of the triple global crisis
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Brinkman, H. J., de Pee, S., Sanogo, I., Subran, L., and Bloem, M. W., (2010), High food prices
and the global financial crisis have reduced access to nutritious food and worsened
nutritional status and health, The Journal of nutrition, Vol. 140, no. 1, pp. 153S-161S.
Christian, P., (2010), Impact of the economic crisis and increase in food prices on child mortality:
exploring nutritional pathways, The Journal of Nutrition, Vol. 140, no. 1, pp. 177S-181S.
Darnton-Hill, I., and Cogill, B., (2010), Maternal and young child nutrition adversely affected by
external shocks such as increasing global food prices, The Journal of nutrition, Vol.
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De Pee, S., Bloem, M. W., Sari, M., Soekarjo, D. D., Tjiong, R., Kosen, S., and Muhilal, S.,
(2000),
es considerable weight loss among mothers and
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and enhance development of young children and our common future, The Journal of
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Dhanani, S., and Islam, I., (2002), Poverty, vulnerability and social protection in a period of crisis:
the case of Indonesia, World Development, Vol. 30, no. 7, pp. 1211-1231.
Fallon, P. R., and Lucas, R. E., (2002), The impact of financial crises on labor markets,
household incomes, and poverty: A review of evidence, The World Bank Research
Observer, Vol. 17, no. 1, pp. 21-45.
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(2000), Dietary changes in African urban households in response to currency
devaluation: foreseeable risks for health and nutrition, Public health nutrition, Vol. 3, no.
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poverty and income distribution: Insights from simulations in selected countries,
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World Health Organization, Vol. 78, no. 1, pp. 108-118.
Nikoloski, Z., and Ajwad, M. I., (2013), Do economic crises lead to health and nutrition behavior
responses? analysis using longitudinal data from Russia, Policy Research working
paper, 6538. The World Bank, Washington, DC, USA.
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Studies in Business and Economics no. 13(3)/2018
Said, A., and Widyanti, W. D., (2002), The impact of economic crisis on poverty and inequality in
Indonesia, Impact of the East Asian Financial Crisis Revisited, The World Bank Institute
and Philippine Institute for Development Studies, Washington, DC, pp. 117-92.
Skoufias, E., and Suryahadi, A., (2000), Changes in household welfare, poverty and inequality
during the crisis, Bulletin of Indonesian Economic Studies, Vol. 36, no. 2, pp. 97-114.
Sobrevinas, A. B., de Jesus, J., and Reyes, C. M., (2010), The Impact of the Global Financial
Crisis on Poverty in the Philippines (No. 2010-04), PIDS Discussion Paper Series.
Suryahadi, A., Hadiwidjaja, G., and Sumarto, S., (2012), Economic growth and poverty reduction
in Indonesia before and after the Asian financial crisis, Bulletin of Indonesian Economic
Studies, Vol. 48, no. 2, pp. 209-227.
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Indonesia, Asian Economic Journal, Vol. 17, no. 3, pp. 221-241.
Suryahadi, A., and Sumarto, S., (2003), Poverty and Vulnerability in Indonesia before and after
the Economic Crisis, Asian Economic Journal, Vol. 17, no. 1, pp. 45-64.
Thorne-Lyman, A. L., Valpiani, N., Sun, K., Semba, R. D., Klotz, C. L., Kraemer, K., Akhter, N.,
de Pee, S., Moench-Pfanner, R., Sari, M. and Bloem, M.W., 2010, Household dietary
diversity and food expenditures are closely linked in rural Bangladesh, increasing the
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on poverty and undernutrition, Proceedings of the National Academy of Sciences, Vol.
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stress, The Journal of nutrition, Vol. 140, no. 1, pp. 201S-207S.
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Debate
Global Poverty and Inequality: Change and Continuity in
Late Development
Andy Sumner
ABSTRACT
This contribution assesses the ‘converging divergence’ thesis that global
inequality is falling and national inequality is rising. The article argues that
falling global inequality is primarily due to China’s development and that
national inequality has risen in some developing countries and fallen in
others. In light of the dominance of China’s development in the global
picture, questions arise as to what has changed and what has not changed
outside of China. A set of changes and continuities is presented. It is then
argued that these changes and continuities provide for the contemporary
relevance an older conceptual lens — that of ‘late development’.
INTRODUCTION
Development studies — meaning simply the study of development, good and
bad — is at an inflection point.1 Horner and Hulme’s thesis of ‘converging
divergence’ (this issue) argues that the world has changed sufficiently to
warrant studying development differently.
Inflection points are regular, even cyclical, within development studies.
In the 1980s and 1990s, for example, arguments over the irrelevance of
high theory to the questions facing developing countries (see e.g. Booth,
This article is a response to the contribution by Rory Horner and David Hulme ‘From International
to Global Development: New Geographies of 21st Century Development’, which appeared online
in December 2017 and is included in this issue. For comments on an earlier draft of this article,
I would like to thank the following: Arief Yusuf, Nicola Phillips, Kyunghoon Kim, Eduardo
Ortiz-Juarez, Collin Constantine, Andrew Fischer, Ingrid Harvold Kvangraven, Peter Kingstone,
Simon Maxwell, Ray Kiely, Duncan Green, Lukas Schlogl, Peter Edward, Ben Selwyn, Paul
Shaffer, Paul Segal and the anonymous referees.
1. This article takes the goal of development to be structural transformation in the tradition
of Lewis (1954, 1955) and others, and as codified by Seers (1963). The article uses the
‘traditional’ binary of developing and developed countries.
Development and Change 50(2): 410–425. DOI: 10.1111/dech.12487
C 2019 International Institute of Social Studies.
Debate: Change and Continuity in Late Development
411
1985; Edwards, 1989) were followed — contradictorily — by arguments
of the depoliticization of development (e.g. Ferguson, 1994), or worse,
the neocolonialism embedded in development knowledge (e.g. Escobar,
1995; Esteva, 1992; Rahnema, 1997). Such critiques have slipped from view
amid the dramatic economic growth in many developing countries since the
2000s.
Horner and Hulme’s converging divergence thesis — that global inequality is falling (convergence) and national inequality is rising (divergence) —
is in many ways an outcome of much of the new prosperity (for some at least)
generated by economic growth. The result, they argue, is a convergence between developing and developed countries, in stark contrast to the famous
Pritchett (1997) article on divergence between developed and developing
countries (the data for which ran to 1994, the article thus being written in the
early period of China’s transformation). Horner and Hulme argue, first, that
the defining binary in the study of development — developing countries or
the South and developed countries or the North — is redundant and, second,
that this implies the need for a conceptual shift in the study of development
from ‘international development’ to ‘global development’.
The remainder of this article is structured in three main sections. The
first discusses the converging divergence thesis, arguing that falling global
inequality is primarily due to China’s development and that national inequality has risen in some developing countries and fallen in others. In light of
the dominance of China’s development in the global picture, the following
section then discusses what has changed and what has not changed outside
of China; in doing so, three changes and three continuities are outlined. The
argument made here is that new binaries are emerging within the developing
world that are of relevance to the study of development. The final substantive
section argues that the changes and continuities identified provide a basis
for the contemporary relevance of an older conceptual lens — that of ‘late
development’ — in the study of contemporary development.
CONVERGENCE AND DIVERGENCE, BIG TIME OR SMALL TIME?
Horner and Hulme (this issue) outline a thesis of ‘converging divergence’;
that is, that global inequality is falling (i.e. a convergence) and national inequality is rising (i.e. a divergence). As a consequence, they argue that the
defining binary in the study of development — that of developed/developing
countries — is no longer valid. They argue the need for a conceptual shift
in the study of development, away from ‘international development’, which
has dominated since the 1990s and is based on this defining binary, towards
‘global development’, which covers all countries. Put another way, the conceptual lens should shift from poor countries, poor people and the South, to
sustainable development issues everywhere; from the developing/developed
binary to global convergence, with national and sub-national divergence;
412
Andy Sumner
from modernization to the United Nations Sustainable Development Goal
agenda, which covers global development, sustainability and social justice;
and finally, from charity and aid to development cooperation, with multiple
financing streams.
So, has global inequality fallen and has national inequality risen? Figures
1 and 2 show global inequality in three manifestations, both with and without
China. The three manifestations are: global inequality as inequality between
all individuals in the world — an estimate of Milanovic’s (2005) global
inequality ‘concept 3’; global inequality as population-weighted inequality between countries’ mean incomes; and global inequality as populationweighted aggregated national or within-country inequality. The first two
estimates are given in 2005 purchasing power parity (PPP) and 2011 PPP
(for reasons I will return to below). Estimates here are from Edward and
Sumner (2018) and do not include adjustments for top incomes data on the
basis that, as innovative as the endeavour to include such data may be, the
vast majority of developing countries do not have these data available (I
return to this issue later too).
What is evident from the two figures is that the fall in between-country
inequality is modest. In fact one could say the fall in between-country inequality almost evaporates between 1990 and 2015 if China is removed, and
there is little change in aggregated within-country inequality (see Figure 2).
Aggregated within-country inequality is surprisingly steady due to a ‘scissor
effect’: national inequality rose in some countries and fell in others, leading
to the two balancing out when aggregated (put crudely, rising inequality in
China, Indonesia and other rapidly growing countries was counterbalanced
by falling within-country inequality in most Latin American countries).
It is also worth drawing attention to some important points on the data
themselves, because such points remind us that any estimates are much more
fragile than is often recognized. For example, the change in price data (from
2005 to 2011 PPP) had an impact on global inequality estimates that was
more or less comparable in size to any estimated fall in global inequality
including China. Figures 1 and 2 make estimates based on 2005 PPP and
2011 PPP, simply to show that the revision of the PPP itself reduced global
inequality across the entire period due to the increase (relative to 2005 PPP) in
aggregate consumption in the more populous developing countries, notably
China, India, Indonesia, Nigeria and Pakistan. Furthermore, even though the
use of 2011 PPP generates lower levels of global inequality throughout the
period, global inequality is still very high.2
In sum: first, the thesis that global inequality is falling is dependent on
China (a point raised by others and made systematically by Niño-Zarazúa
et al., 2014). Once China is removed, global inequality between countries in
2. If one estimates global inequality as inequality between all individuals in the world, but
excludes China, then global inequality fell very little from 1990 to 2012: from a Gini of
0.66 in 1990 to 0.65 in 2012 using 2011 PPP, or from 0.70 to 0.69 using 2005 PPP.
Note: For detailed methodology, see source.
Source: Edward and Sumner (2018).
Figure 1. Estimates of Global Inequality (Gini), 1990–2015
[Colour figure can be viewed at wileyonlinelibrary.com]
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Note: For detailed methodology, see source.
Source: Edward and Sumner (2018).
Figure 2. Estimates of Global Inequality (Gini) excluding China, 1990–2015
[Colour figure can be viewed at wileyonlinelibrary.com]
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Andy Sumner
Debate: Change and Continuity in Late Development
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2012/2015 is only slightly lower than in 1990. One should not read this as
saying that China’s development does not matter, rather that the issue of the
enormity of China’s development may lead to one missing other changes
in the world outside China.3 Second, the divergence component — overall
aggregated within-country inequality — is also virtually the same as national
inequality in 1990 because national inequality has fallen in some countries
and risen in others. Again, this is not to say that national inequality does
not matter. Clearly it does matter and intrinsic and instrumental reasons can
be given as to why. Furth
