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The results of new direct price level comparisons across 148 countries in 2005 have led to large revisions of purchasing power parity exchanges rates, particularly for China and India. The recalculation of international and global inequalities, using the new purchasing power parity rates, shows that inequalities are substantially higher than previously thought. Inequality between global citizens is estimated at 70 Gini points rather than 65 as before. The richest decile receives 57 percent of global income rather than 50 percent.

Average income --- Consumption expenditures --- Country dummies --- Country regressions --- Developed economies --- Developing countries --- Economic Theory and Research --- Emerging Markets --- Empirical studies --- Equity and Development --- Gini coefficient --- Growth rate --- Growth rates --- Household surveys --- Income --- Income levels --- Inequality --- Macroeconomics and Economic Growth --- Mean incomes --- Policy research --- Poverty headcount --- Poverty Impact Evaluation --- Poverty line --- Poverty Reduction --- Power parity --- Private Sector Development --- Real growth

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August 1995 - Problems associated with Sub-Saharan Africa's slow growth are low school attainment, political instability, poorly developed financial systems, large black-market exchange-rate premia, large government deficits, and inadequate infrastructure. Improving policies alone boosts growth substantially. But if neighboring countries adopt a policy change together, the effects on growth are more than double what they would have been if one country had acted alone. Africa's economic history since 1960 fits the classical definition of tragedy: potential unfulfilled, with disastrous consequences. Easterly and Levine use one methodology - cross-country regressions - to account for Sub-Saharan Africa's growth performance over the past 30 years and to suggest policies to promote growth over the next 30 years. They statistically quantify the relationship between long-run growth and a wider array of factors than any previous study. They consider such standard variables as initial income to capture convergence effects, schooling, political stability, and indicators of monetary, fiscal, trade, exchange rate, and financial sector policies. They also consider such new measures as infrastructure development, cultural diversity, and economic spillovers from neighbors' growth. Their analysis: Improves substantially on past attempts to account for the growth experience of Sub-Saharan African countries; Shows that low school attainment, political instability, poorly developed financial systems, large black-market exchange-rate premia, large government deficits, and inadequate infrastructure are associated with slow growth; Finds that Africa's ethnic diversity tends to slow growth and reduce the likelihood of adopting good policies; Identifies spillovers of growth performance between neighboring countries. The spillover effects of growth have implications for policy strategy. Improving policies alone boosts growth substantially, but if neighboring countries act together, the effects on growth are much greater. Specifically, the results suggest that the effect of neighbors' adopting a policy change is 2.2 times greater than if a single country acted alone. This paper - a joint product of the Macroeconomics and Growth Division and the Finance and Private Sector Development Division, Policy Research Department - is part of a larger effort in the department to understand the link between policies and growth. The study was funded by the Bank's Research Support Budget under the research project Patterns of Growth (RPO 678-26).

Black Market --- Business Cycle --- Country Regressions --- Currencies and Exchange Rates --- Economic Growth --- Economic Theory and Research --- Educational Attainment --- Exchange Rate --- Finance and Financial Sector Development --- Financial Development --- Financial Sector --- Financial Systems --- Growth --- Growth Performance --- Growth Rate --- Growth Rates --- Health, Nutrition and Population --- Inequality --- Long-Run Growth --- Macroeconomics and Economic Growth --- Nutrition --- Per Capita Income --- Policy Change --- Policy Research --- Political Instability --- Political Stability --- Poor Countries --- Poor Growth --- Poverty Reduction --- Pro-Poor Growth