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Research: Global Inequality is Decreasing, Poor Getting Richer

The Associated Press
The Associated Press/ Manish Swarup
TOM CICCOTTA

New economic research from May 2017 suggests that global inequality has been decreasing since 2000, greatly increasing the earnings share of the poor.

Research by Daniel Waldenström of the Paris School of Economics and Olle Hammar of Uppsala University on global economic trends suggests that global inequality has declined, primarily during the 2000s. During that decade, the global Gini coefficient, a statistic measure used to represent the variance in income, decreased by nearly 10 points and the earning shares of the poor half-doubled.

We estimate trends in global earnings dispersion across occupational groups using a new database covering 66 developed and developing countries between 1970 and 2015. Our main finding is that global earnings inequality has declined, primarily during the 2000s, when the global Gini coefficient dropped nearly 10 points and the earnings share of the world’s poorest half doubled. Decomposition analyses emphasize the role of income convergence between poor and rich countries and that earnings have become more similar within occupations in traded industries. Sensitivity checks show that the results are robust to varying real exchange rates, inequality measures and population definitions.

Over the past several decades, progressive economists have harped on the role of state and global income inequality in causing hardship and poverty for lower class citizens. Such assumptions evoke the fixed economic fallacy, which holds that there is a finite amount of wealth in society. Take Nobel-winning economist Joseph Stiglitz for example, who wrote this in his book, The Price of Inequality:

One can think of what’s been happening in terms of slices of a pie. If the pie were equally divided, everyone would get a slice of the same size, so the top 1 percent would get 1 percent of the pie. In fact, they get a very big slice, about a fifth of the entire pie. But that means everyone gets a smaller slice.

But if this premise is incorrect, then perhaps inequality isn’t such a problem. Consider the concept put forth by Oklahoma State University professor Per Bylund who argues that the lack of value creation is what causes poverty.

According to the research, the main driver behind the inequality fall of the 2000s was the global income convergence between developed and developing countries. Before that period, global inequality largely fluctuated, Waldenström and Hammar suggest that between 1970 and 2010, it experienced a significant decrease. Such a conclusion is contrary to the rhetoric of progressives, who suggest that increasing inequality will lead to civil society’s undoing.

Global earnings inequality fell initially in the 1970s but was then virtually flat over the rest of the 1970s and 1980s, followed by a modest increase in the early 1990s. A large decline is recorded during the late 1990s and early 2000s, after which the decline halted, and global earnings inequality has been flat during the 2010s and at its lowest level over the entire period. The fall over the period is sizeable: the net earnings Gini dropped from 66 percent in 1997 to 57 percent in 2012, i.e., by almost ten points in only 15 years.

Tom Ciccotta is a libertarian who writes about economics and higher education for Breitbart News. You can follow him on Twitter @tciccotta or email him at tciccotta@breitbart.com

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