Sunday, June 04, 2006

The war on poverty is being won

As is often discussed, the US income distribution has been widening over the past few decades. A Rawlsian, however, would insist on a global view of the situation: Behind the veil of ignorance, you wouldn't know you were an American. He would take heart in this research, just published in the May 2006 issue of the Quarterly Journal of Economics:

The world distribution of income:
Falling poverty and ... convergence, period

Xavier Sala-i-Martin

We estimate the World Distribution of Income by integrating individual income distributions for 138 countries between 1970 and 2000. Country distributions are constructed by combining national accounts GDP per capita to anchor the mean with survey data to pin down the dispersion. Poverty rates and head counts are reported for four specific poverty lines. Rates in 2000 were between one-third and one-half of what they were in 1970 for all four lines. There were between 250 and 500 million fewer poor in 2000 than in 1970. We estimate eight indexes of income inequality implied by our world distribution of income. All of them show reductions in global inequality during the 1980s and 1990s.

With the rapid growth in China and India over the past few years, it is a good bet that this trend is continuing.

Update: Mark Thoma points me to a great graphic illustrating these results.