Global Economic Inequality

by Max Roser[cite]

First published in December 2013; updated October, 2016.

This entry presents the evidence on global economic inequality. It

considers economic history and how global inequality has changed and is
predicted to continue changing in the future.

A related entry on Our World in Data presents the empirical evidence of

how income inequality has changed over time, and how the levels of
inequality in different countries can vary significantly. It also presents
some of the research on the factors driving the inequality of incomes.

I. Empirical View

I.1 Global divergence followed by convergence – Economic

history in one chart

The chart below shows the distribution of annual income among all world
citizens. To make incomes comparable across countries and time, daily
incomes are measured in constant 2011 International Dollars—this is a
currency that would buy a comparable amount of goods and services that
a U.S. dollar would buy in the United States in 2011 (for a more detailed
explanation, see here).

The distribution of incomes is shown at 3 points in time:

 In 1800, few countries had achieved economic growth. The chart

shows that the majority of the world lived in poverty with an income
similar to the poorest countries today. Our entry on global extreme
povertyshows that at the beginning of the 19th century the huge
majority—more than 80%—of the world lived in material conditions
that we would refer to as extreme poverty today.
 In the year 1975, 175 years later, the world had changed—it had
become very unequal. The world income distribution was bimodal,
with the two-humped shape of a camel. One hump below the
international poverty line and a second hump at considerably higher
incomes—the world had divided into a poor, developing world and a
developed world that was more than 10-times richer.
  Over the following 4 decades the world income distribution has again
changed dramatically. The poorer countries, especially in South-East
Asia, have caught up. The two-humped "camel shape" has changed
into a one-humped "dromedar shape". World income inequality has
declined. And not only is the world more equal again, the distribution
has also shifted to the right—the incomes of the world's poorest
citizens have increased and poverty has fallen faster than ever before
in human history.

We have visualized a similar dataset from the OECD here.1

Global inequality in 1800, 1975, and 20152

I.2 Global income inequality increased for 2 centuries and is
now falling

The visualization below shows the distribution of incomes between 1988

and 2011. The data was compiled by the economists Branko Milanovic
and Christoph Lakner.3 To see the change over time, select the years just
above the distribution.

The previous visualization, which showed the the change from 1820 to
the year 2000 is based on estimates of inflation-adjusted average
incomes per country (GDP per capita) and a measure of income
inequality within a country only. It gives us a rough idea of how the
distribution of incomes changed, but it is not very detailed and not very
precise. In contrast to this, the work by Branko Milanovic and Christoph
Lakner is based on much more detailed household survey data. This data
measures household income at each decile of the income distribution and
the two authors used this information to arrive at the global income
distribution. The downside of this approach is that we can only go as far
back in time as household surveys were conducted.

The visualization shows the end of the long era in human history in which
global inequality was increasing. Starting with industrialization in North-
Western Europe, incomes in this part of the world started to increase
while material prosperity in the rest of the world remained low. While
some countries followed the European industrialization – first Northern
America, Oceania, and parts of South America and later Japan and East
Asia – other countries in Asia and Africa remained poor. As a
consequence of this, global inequality increased over a long period of
time. Only in the period shown in the visualization below did this change:
With rapid growth in much of Asia in particular, the global distribution of
incomes became less unequal. The incomes of the poorer half of the
world population rose faster than the incomes of the richer half of the
world population.

Global Income Distribution 1988 to 20114

If you want to use this visualisation for a presentation or for teaching purposes etc. you can download a
zip folder with an image file for every year and an animated .gif here.

I.3 The latest data on global inequality and a look into the
future
The visualization below shows how the global income distribution has
changed over the decade up to 2013. Tomáš Hellebrandt and Paolo
Mauro, the authors of the paper5 from which this data is taken, confirm the
finding that global inequality has declined: the Gini coefficient of global
inequality has declined from 68.7 to 64.9.

The visualisations above show the income distribution on a logarithmic x-

axis. This chart in contrast plots incomes on a linear x-axis and
thereby emphasizes how very high global inequality still is: The bulk of
the world population lives on very low incomes and the income
distribution stretches out very far to the higher incomes at the right-hand
side of the chart; and incomes over 14,000 international-$ are cut off as
they would make this chart with a linear x-axis unreadable.

A second striking and very positive global development shown in this

chart is the rise of the global median income. In 2003 half of the world
population lived on less than 1,090 international-$ per year and the other
half lived on more than 1,090 international-$. This level of global median
income has almost doubled over the last decade and was 2,010
international-$ in 2013.

Finally, the authors also dare to make a projection of what global

inequality will look like in 2035. Assuming the growth rates shown in the
insert in the top-right corner, the authors project global inequality to
decline further and to reach a Gini of 61.3. At the same time the incomes
of the world's poorer half would continue to increase strongly so that the
global median income could again double and reach 4,000 international-$
in 2035.

The global income distribution in 2003, 2013, and the projection for 20356
If you are looking for a visualisation of only the observed global income distribution in
2003 and 2013 you find it here.

How global inequality has changed from 2003 to 2013

The following visualisation offers an alternative view on the data by

Hellebrandt and Mauro7 shown in the chart before.

The chart shows the yearly disposable income for all world citizens in
both 2003 and 2013. On the x-axis you see the position of an individual in
the global distribution of incomes and on the logarithmic y-axis you see
the annual disposable income at that position.

The increase in prosperity—and decrease of poverty—is substantial. The

income cut-off of the poorest 10% has increased from 260 international-$
to 480 international-% and the median income has almost doubled from
1,100 international-$ to 2,010. Global mean income in 2013 is 5,375
international-$.8
 The global income distribution in 2003 and 20139

Global income inequality is still very high and will stay very high for
a long time

The visualization below presents the same data in the same way, except
that the y-axis is now not logarithmic but linear. This perspective shows
the still very high level of global inequality even more clearly.

The previous and the following visualisation show how very high global
income inequality still is: The cut-off to the richest 10% of the world in
2013 was 14,500 int-$; the cut-off for the poorest 10% was 480 int-$. The
ratio is 30.2.

While global inequality is still very high, we are now living in a period of
falling inequality: In 2003 this ratio was 37.6. The Gini coefficient has also
fallen from 68.7 to 64.9.
Taking the historical experience as a guide for what is possible in the
future we have to conclude that global inequality will remain high for
a long time. To understand this, we can ask how long it would take for
those with incomes at the poorest 10% cutoff to achieve the current
incomes of the richest 10% cutoff (which is 14,500 international-$). This
income level is roughly the level of GDP per capita above which
the poverty headcount gets close to 0% for most countries (see here).

How long does it take for incomes to grow from 480 int-$ to 14,500
int-$?

2% growth 172.1 years

4% growth 86.9 years

6% growth 58.5 years

8% growth 44.3 years

10% growth 35.8 years

Even under a very optimistic scenario it will take several decades for the
poor to reach the income level of the global top 10%.

2% is roughly the growth rate that the richest countries of today

experienced over the last decades (see here). We have seen that poorer
countries can achieve faster growth, but we have not seen growth rates
of more than 6% over a time frame as long as necessary to reach the
level of the global 10% in such a short time. If the past is a good guide for
the future, the world will very likely be highly unequal for a long time.

The global income distribution in 2003 and 201310

I.4 Inequality within countries and inequality between
countries

Global inequality is driven by changes both of the inequality within

countries and the inequality between countries. The below visualization
shows how both of these changes determine the changing global
inequality.

– Inequality within countries followed a U-shape pattern over the course

of the 20th century.

– Inequality between countries increased over the course of 2 centuries

and reached its peak level in the 1980s according to the data from
Bourguignon and Morrison shown here. Since then, inequality between
countries has declined.

As is shown in the visualization below, the inequality of incomes between

different countries is much higher than the inequality within countries. The
consequence of this is that the trend of global inequality is very much
driven by what is happening to the inequality between countries.
 Global inequality between world citizens and its components 1820-199211
Full screen view Download Data

Within-country income percentiles vs world income percentiles by country – Milanovic

(2010)12

I.5 Maps – Current World Income Distribution

World map of GDP per square km – Gallup and Sachs (1999)13

World GDP density map, 1990 and 2025 – SEDAC (NASA)14
I.6 Economic Convergence between Countries

Strong convergence in Europe, 1950-2006 – World Development Report (2009)15

 Annual real GDP growth in poorer and richer countries, 1961-2013 – Max Roser16
Full screen view Download Data

GDP accumulated change, 1990-2006 – Wikipedia (originally from the IMF)17

I.7 Past Level of GDP and Subsequent Growth

Growth vs initial income (population-weighted) – Sala-i-Martin (2006)18

I.8 Growth of Given Size by Time - Speed of Catching up

Years for income per capita to grow from $2,000 to $4,000 (1990$ US) – Aghion &
Durlauf [Eds.] (2006)19
Number of years for GDP per person to double, 1700-2040 – The Economist20
I.9 The changing geography of the global economy

Shares of world GDP (% of world total), 1700-203021

 The world's shifting economic center of gravity, 1 CE - 2025 CE – Oxford Martin
School (2013)22

I.10 Present World and Future

Wikipedia's list of estimates of real gross domestic product growth rate for
the latest available year is here.

II. Data Quality & Definition

Growth convergence vs absolute income convergence, 1990-2003 – Todaro & Smith
(2011)23
The already mentioned study by Sudhir Anand and Paul Segal is a very good review of
this topic.24

Total and between inequality: comparisons of different studies – Liberati (2013)25