Contradictory trends in global income inequality: a tale of two biases
Date
2005
Authors
Dowrick, Stephen
Akmal, Muhammad
Journal Title
Journal ISSN
Volume Title
Publisher
International Association for Research in Income and Wealth
Abstract
Did global income inequality rise or fall over the last decades of the twentieth century? The answer depends on how cross-country income comparisons are made. Exchange rate comparisons suggest that inequality rose whilst the purchasing power comparisons of the Penn World Table suggest it fell. We show that both measures of real incomes lead to biased international income comparisons. Exchange rate comparisons ignore the relative price of non-tradables, whilst the fixed price method underlying the Penn World Table is subject to substitution bias. The contradictory trends are due to growing dissimilarity between national price structures increasing the degree of bias in each method. When we correct the income data to eliminate bias we find no compelling evidence of a significant change in world inequality.
Description
Keywords
Citation
Collections
Source
Review of Income and Wealth
Type
Journal article
Book Title
Entity type
Access Statement
License Rights
Restricted until
2037-12-31