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Using social tables, the author makes an estimate of global inequality (inequality among world citizens) in the early 19th century. The analysis shows that the level and composition of global inequality have changed over the past two centuries. The level has increased, reaching a high plateau around the 1950s, and the main determinants of global inequality have become differences in mean country incomes rather than inequalities within nations. The inequality extraction ratio (the percentage of total inequality that was extracted by global elites) has remained surprisingly stable, at around 70 percent of the maximum global Gini, during the past 100 years.

Average income --- Average incomes --- Economic review --- Equity and Development --- Growth rates --- Historical perspective --- Household surveys --- Income --- Income distribution --- Income distribution data --- Income distributions --- Income inequality --- Income levels --- Incomes --- Inequality --- International Economics & Trade --- Mean income --- Mean incomes --- Policy research --- Poverty Impact Evaluation --- Poverty Reduction --- Power parity --- Public policy --- Public Sector Development --- Real growth --- Services and Transfers to Poor --- Trade Policy

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Inequality in world income is very high, according to household surveys, more because of differences between mean country incomes than because of inequality within countries. World inequality increased between 1988 and 1993, driven by slower growth in rural per capita incomes in populous Asian countries (Bangladesh, China, and India) than in large, rich OECD countries, and by increasing income differences between urban China on the one hand and rural China and rural India on the other; Milanovic derives the distribution of individuals' income or expenditures for two years, 1988 and 1993. His is the first paper to calculate world distribution for individuals based entirely on data from household surveys. The data, from 91 countries, are adjusted for differences in purchasing power parity between the countries. Measured by the Gini index, inequality increased from an already high 63 in 1988 to 66 in 1993. This increase was driven more by rising differences in mean incomes between countries than by rising inequalities within countries. Contributing most to the inequality were rising urban-rural differences in China and the slower growth of rural purchasing-power-adjusted incomes in South Asia than in several large developed market economies. This paper - a product of Poverty and Human Resources, Development Research Group - is part of a larger effort in the group to study inequality and poverty in the world. Also published in The Economic Journal, January 2002 pp. 51-92. The author may be contacted at bmilanovic@worldbank.org.

Consumption --- Economic Theory --- Economic Theory and Research --- Emerging Markets --- Finance and Financial Sector Development --- Financial Literacy --- Growth Models --- Health Systems Development and Reform --- Health, Nutrition and Population --- Household Income --- Household Surveys --- Income --- Income Differences --- Income Distribution --- Income Distribution Data --- Income Inequality --- Increasing Inequality --- Inequality --- Macroeconomics --- Macroeconomics and Economic Growth --- Mean Incomes --- Median Voter --- Median Voter Hypothesis --- Personal Income --- Political Economy --- Poverty Diagnostics --- Poverty Impact Evaluation --- Poverty Reduction --- Power Parity --- Private Sector Development --- Rising Inequality --- Rural Development --- Rural Poverty Reduction --- Services and Transfers to Poor --- Social Protections and Labor