The end of North-South, in one graph

January 29, 2014 4 By Duncan Green

Two important findings from the latest Branko Milanovic (with Christoph Lakner) World Bank paper on global income distribution.

First , it had previously been thought that, due to the rise of China, the global Gini was falling – i.e. if you took the global population as a whole, inequality was falling. Turns out this may not be true due to under-reporting of top incomes (can’t think why that happens). ‘With such an adjustment the downward trend in the Gini almost disappears’. Oops.

Second the paper gives a lovely graphic demonstration of ‘the end of North South’. In 1988 the global distribution was twin peaked – the peaks corresponding broadly to a rich North and poor South. Since then growth in emerging economies, and stagnation for all but the richest in the rich world, has obliterated the valley between the peaks (see graph).

global distribution of income 1988-2008

“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.”

One other titbit:

“Most of global inequality is accounted for by differences between countries, although this contribution has declined over time, suggesting that countries have become more similar. The within-country component of global inequality, however, has increased continuously over this twenty-year period.”

So there you have it, just as the North-South divide starts to fade, the divides within countries kick in to maintain the overall level of global economic unfairness.