Intercountry Income Inequality: New Analytic Directions

This is a study of world income inequality. It begins from the observations that average incomes in the richest nations are thirty times those in the poorest nations, and that intercountry income -- not inequality within nations -- is the major component of total world income inequality. Previous work in this research program focused on developing a common formula for the conventional inequality measures (the coefficient of variation, the Gini, the Theil index, and the variance of the logarithms) and then applying that formula to trends in intercountry inequality to determine the essential facts. Among the questions addressed were: how large is the inequality, whether it is increasing or decreasing, whether the trend is due to nations' differential economic growth or their differential population growth, what countries contribute most to intercountry inequality and to change in intercountry inequality, and whether results are robust over the conventional inequality measures. This new phase of the project will extend that line of research in new analytic directions, to include a social welfare component. Comparing trends in intercountry inequality based on different assumptions about the relative welfare impact of income transfers will determine the extent to which conclusions about trends in intercountry inequality depend on the relative weight given to the lower and upper ends of the income distribution. This research will bring a new level of scientific rigor to sociological study of the important question of whether income is becoming more equally or less equally distributed across nations.