Inequality driven down by inequal growth
26 August 2020
Growing middle-class
A well-known study by Branko Milanovic showed how in the period 1998-2008 global inequality (measured through the Gini coefficient) contracted. More interestingly, he provided global real income growth (in PPP) by centile of income.
- The strongest growth was experienced by the emerging countries’ middle class.
- The difference between the extremely rich and the extremely poor kept widening.
Future income distribution
A further study by Hellebrandt & Mauro, provides estimates on income growth between 2013 and 2035. Again, the Gini coefficient is expected to contract, indicating a reduction in inequalities across the globe (based on 2013 PPP).
- The number of people earning more than US$8,874 per year will increase by 1.2 billion, with the largest gains being in China.
- In the bracket just below, the increase will be of about 1bn people, mainly from India and sub-Saharan Africa.
The devil maybe hiding in the details
The spectacular rise of the middle-class in emerging countries, led by China, is hiding how real income of developed countries’ middle-class is stagnating (when not declining). The consequences are both political and economic.
- In developed countries the gap between the middle class and the very rich is widening, leading to a feeling of disconnect between leaders and the vast majority.
- Emerging economies’ middle-class is fast overtaking its developed economies’ peers.
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