New Light on Income Inequality

ABU DHABI – Speeches by politicians on inequality tend to be short on facts and long on ideological assertion. In developing and emerging economies, one charitable explanation for the poor quality of public discourse about income inequality is that data on income distribution are often unavailable or dubious. On this most important of subjects, debates tend to generate more heat than light.

A new set of studies could help put an end to all that. Led by Nora Lustig, a professor of economics who specializes in Latin America, a team at Tulane University’s Commitment to Equity Institute created comprehensive databases on both the state of income distribution and the effects of government policies on that distribution. Crucially, the figures are comparable across a large set of middle- and low-income countries and also with data available for advanced countries. Preliminary conclusions emerging from these studies will illuminate political debates – and likely annoy ideologues of both the right and the left.

Start, Lustig argues in a recent paper, with the fact that world income inequality is not rising. Consider the Gini coefficient, the most common measure of inequality, which runs from a value of zero for perfect equality to 100 for perfect inequality (one person receives all the income). The average Gini score (not weighted by population) in countries for which there are data declined slightly in the 2000-2010 period, from 39 to 38.

Yes, the score rose in rich countries over the same period – from 29.8 to 30.4. But it fell precipitously in Latin America, from a scandalous 55.1 in 2000 – which made the continent the world’s most unequal region – to a still-very-high 50.2 a decade later. The Gini score also dropped in South Asia. In Sub-Saharan Africa, where data are more fragile, it seems to have remained roughly constant.