The Evolution of Global Inequality: Absolute, Relative and Intermediate Views

Abstract

We compare absolute, relative and intermediate views on the evolution of global inequality between 1980 and 2009. According to the relative view, inequality remains invariant after a uniform proportional change of all incomes whereas the absolute view requires invariance to a uniform change of all incomes with the same amount. We use a generic intermediate view which states that an income distribution is as unequal as another one if it can be obtained as a weighted average of a uniform proportional and a uniform absolute change of the incomes. Using recent data on GDP per capita for 115 countries, we find considerable support for the claim that world inequality increased for the absolute view and for intermediate views which move substantially in the direction of the relative view.

Keywords: global inequality, intermediate inequality, Lorenz dominance

JEL Classification: D31, D63, I31, O5