Global Income Inequality: What it is and why it matters

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. This is necessary precisely because of the relative underdevelopment of the topic, reflected in the fact that the same or similar terms are often used in the literature to mean different things. We need to distinguish between inequality among countries ’ mean incomes (inter-country inequality or Concept 1 inequality as dubbed by Milanovic, 2005), inequality among countries ’ mean incomes weighted by countries ’ populations (Concept 2 inequality), and inequality between world individuals (global or Concept 3 inequality). 1 World Bank. The views expressed are personal and should not be attributed to the World Bank or its affiliated organizations.