Inequality - Milanovic

Question 1

Explain Milanovic’s three concepts of global inequality and how they have evolved over time.

Answer 1

• Global inequality has increased from around 1980 to around 2000

Linked to concept 1 in the cross-country Gini coefficient : based on income capita across countries, without population weighting.

• Global inequality has decreased from around 1980 to around 2000

Linked to concept 2 in the cross-country Gini coefficient based on income per capita across countries, with population weighting.

• Global inequality has been roughly constant from around 1980 to around 2000
  Linked to concept 3: based on individual income

Question 2

Discuss how globalization has affected income distribution globally, particularly focusing on the rise of the global middle class and the top 1%.

Question 3

Figure 4 from Milanovic’s, discussing the implications of the observed changes in real income across different global income percentiles.

Answer 3

The figure shows that income gains were not equally distributed across the global population between 1988 and 2008.

Middle-Income Surge:

There is a noticeable surge in income for individuals around the 50th percentile, reflecting the rise of the global middle class. This is mainly due to significant economic growth in countries like China and India.

Top 1% Gains:

The top 1% of the global income distribution also saw substantial income gains, further entrenching their economic position.

Polarization: The data indicate a polarization in global income distribution, with substantial gains for the very rich and the emerging middle class, but stagnation for the upper middle class and the poorest segments.