World Inequality and Globalization by Bob Sutcliffe

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World Inequality and Globalizationby Bob
Sutcliffe

• Presented by
• Meg Spearman
• April 13, 2007
• PUAF 699I
• Professor Milanovic

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Outline

• 1. Introduction
• 2. Three Approaches
• 3. Data Alternatives
• 4. Inter-Country Distribution
• 5. Global Distribution
• 6. Another Method True Distribution
• 7. Using a Different Statistic Ratio of
  Extremes
• 8. Adding Another Indicator Life Expectancy
• 9. Adding Even More Indicators The HDI
• 10. Summing Up the Evidence
• Inequality and Globalization
• A Globalization Index?
• Questions/Comments

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2. Approaches 3. Data Types

• Three Approaches
• 1.Distribution of income alone
• 2.Measure world distribution of a more complex
  indicator than income
• 3.Examine ratios between income groups

• Data Alternatives
• 1.How to compare incomes (exchange rate v. PPP)
• 2.Weighted or un-weighted figures
• 3.Inter-country or global
• 4.Poverty or Distribution

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4. Inter-Country Distribution

• Convergence and Divergence of Country Averages
• Population-Weighted Convergence and Divergence
• Converging and Diverging Blocs

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Slow convergence
Rapid divergence
Only exception to the pattern.
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(No Transcript)
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Strong convergence
Stationary
(population weighted)
Slow divergence
Slight convergence
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• Two Limitations of Inter-Country Comparisons
• Within country distribution unaccounted
• Assumes national income is equivalent to welfare

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5. Global Distribution
Historical
Up to 1980, within-country contribution toward
inequality falls and inter-country contribution
rises.
Recent
After 1980, within-country contribution toward
inequality rises and inter-country contribution
falls.
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6. True Distribution via Household Surveys
(Milanovic)

• Eliminates the problems of national income
  estimates BUT It doesnt account for amounts
  received from social spending on free services
  that contribute to welfare.
• Calculations for 1988 (.63) 1993 (.66) very
  close to nat income Gini calculations
• The world has a level of inequality scarcely
  encountered in national economies.
• The calculation that differs (1993) implies there
  is a rise between 88-93. This is attributed to
  increasing urban-rural inequality.

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7. Ratios of Extremes
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Most Striking ratio of richest to poorest 1
rises in both datasets.
WDI is not strictly comparable to 2 sets above
because they lack earlier distribution estimates,
but they are the most recent and complete picture
(92.5 worlds population, WB, 125 countries).
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8. Adding Life Expectancy
Problems Quality does not necessarily rise with
quantity. Since 1990, life exp. in 42
countries steady or fell due to AIDS.
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There is a tendency for greater loss of healthy
life years in countries with lower life
expectancy. Thus, the distribution of healthy
life expectancy is more unequal than the
distribution of life expectancies as a whole.
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9.The HDI

• Three indicators
• Log income/head
• Life expectancy
• Education
• - Divergence nearly
• impossible
• - Index of welfare is
• not an index of
• growth

Countries worse-off in 1975 had the greatest
increase by 2001
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10. Summing up the Evidence

• Inequality has increased more or declined less
• Use unweighted national GDPph
• Compare national values using exchange rates (but
  not since 95)
• When using PPP, use Maddison instead of PWT 6.1
  or WDI
• Use data directly derived from household studies
  rather than processed GDP ph figures
• Compare ratios of extremes rather than (or at
  least as well as) integral measures

• Inequality has declined more or increased less
• Use population-weighted national GDPph
• Compare national values using PPP estimates (but
  not since 1995)
• When using PPP data, use WDI or PWT 6.1 instead
  of Maddison
• Use GDPph figures processed by distribution
  figures
• If comparing ratio extremes, look at the less
  extreme (50/50, 20/20)
• Add another variable, especially life expectancy

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11. Inequality and Globalization

• Since 1950, there has been a large increase in
  movement of goods, services and capital, though
  not so much people (i.e. labor).
• BUT if the answer of what globalization is cannot
  be summed up with a single variable (just as
  there cannot be just one variable to define
  inequality).
• Kevin ORourke points to the individual
  endowments of countries, which means individual
  cases are more instructive.
• Disaggregation is needed to consider either
  incomes or inequalities.
• Shape of global inequality still unclear (i.e.
  uni-modal - one big capitalistic world, OR
  bi-modal - imperialism is still alive!)

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12. A Globalization Index?

• A.T. Kearney Measuring Globalization Whos up?
  Whos down? (2003) (62 countries, by the
  Carnegie Endowment for International Peace)

• Argues that causes of globalization are confused
  with its effects
• Nevertheless, technological and personal
  integration continue even if a countrys overall
  economic integration is minimal

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Ireland!
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Green Globalization Index Yellow Manufacturing
labor cost/worker (1995-1999)
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Questions/Comments

• The jurys still out on a single over-arching
  pattern between globalization and welfare or
  income
• How do we define globalization? Is it a cause or
  an effect?
• Should it be tied to existing or new definitions
  of welfare, security, income, political
  stability etc?