Economic Inequality Between Countries Essay

1555 words - 6 pages

Inequality can be traced as far back as possible. It can also be described as disparity. This disparity can be in terms of income, wealth, class etc. Economic inequality can be described as the disparity between income of individuals or household within and outside a country. When “income inequality” is mentioned, most people think about it in a within the country context, but in a world that is becoming more integrated, economic inequality between countries is becoming more relevant. In a world where other people’s income and wealth affect our perception of life, one might ask the question, “is economic inequality the biggest issue of our time”.

The history of economic inequalities between countries can be traced back to the 18th century and has taken different forms since then, especially, in the 19th century till date. Firstly, the Lorenzo curve. This is a model use for measuring inequality. It was developed by Max Lorenz in 1905. The Lorenz curve is usually in a form of graph on which the cumulative proportion of income is plotted against the cumulative proportion of population on the in which their axes ranges from [zero (0) to one (1)] or [0% to 100%]. The Gini index, another method of measuring inequality is derived from the Lorenz curve. The Lorenz curve is shown in the graphical illustration (figure 1) below. The first calculation of inequality across world citizens were done in the early 1980s (Berry, Bourguignon and Morrisson, 1983; Grosh and Nafziger, 1986). This is because in order to calculate global inequality, one needs to have data on (within country) 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, Soviet Union and its constituents republics and large parts of Africa (Milanovic, Global Income Inequality: What It Is And Why It Matters, 2006, p. 3). The decline of global economic inequality between 1998 and 2008 is the first since 1760 according to World Bank. As shown in “figure 2”, the bottom two-thirds of world population received 12.7 percent of world income in 2008 as against 9.3 percent in 1998. But the stagnation or decline in real income of the global upper middle class, and big gains realized by the top 1%, reverse the position of the Lorenz curves for the last one-fifth of the distribution. Here, the top 1% in 2008 receives almost 15 percent of global income vs. 11½ twenty years earlier (Milanovic, 2012, p. 3). An example of the effect of the decline in equality between 1988 and 2008 is that of china where a person with a median income is richer than only 10% of the world population as of 1988 but that had changed in 2008, a median income earner in china is now richer than one-half of world population. Above are the information (Lorenz curve, Gini index and decline in global inequality between 1988 and 2008) that makes up the history of economic inequality...

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