On Ginis and 1947-1998 US Ginis

Dear people,
It is clear to me that history seen with a world-system vision requires a 
huge information that includes economic data of the past. My main interests 
are on contemporary sociology and economics, which will be the raw material 
for future history experts. Perhaps, neither PSN, neither WSN is the best 
place to deal with the theory behind statistics and economics, because we 
would be asking too much from historians and sociologists. It is enough 
that 
they handle the final results of statistics and know in general terms the 
main debates around this kind of data, because it affects their work. Given 
the fact that I do not believe in deterministic models in social sciences, 
but I do in human-individual or collective projects, please accept that my 
contribution to the list is necessarily different from most of yours and 
may 
go counterwise those of the list owners, eventhough it shares their 
humanistic goals for global justice.
Next, and only for your information, it is a recent article from Milanovic 
(a World Bank researcher), which shows some of the conceptual and practical 
struggles inside that institution whose policies are affecting adversely 
the 
poorest of the world, and even women, youth, workers, and non-mainstream 
ethnic-groups of advanced and underdeveloped nations. Thanks, Emilio
***********
Selected Reading: Article on Globalization and Inequality

Lundberg, M. and B. Milanovic. 2000. "Globalization and Inequality: Are 
They 
Linked and How?". World Bank: Washington, DC.

Globalization and inequality have recently received a great deal of 
attention (Martin Wolf, "The big lie of global inequality", Financial 
Times, 
February 8, 2000). We feel that the discussion has been clouded by the lack 
of terminological and conceptual clarity, and often rather cavalier 
depiction of the links between the two. Some proponents of globalization 
claim that the process brings free and universal benefits. Conversely, some 
opponents equate globalization with social and environmental destruction. 
We 
would like to shed some empirical and substantive light on this highly 
contentious subject.

There are at least three distinct concepts of inequality which are linked 
with globalization. First is inequality within nations. This is the 
inequality people have in mind when they argue, for example, that 
globalization may be responsible for widening income disparities in the UK 
or the US. Second, there is inter-national inequality, which refers to 
differences between countries’ average per capita incomes (or GDPs). This 
is 
the inequality one has in mind when he speaks of how globalization affects 
different countries’ growth rates; whether they converge (which still does 
not mean that their GDP levels converge!) or not. The third concept of 
inequality is world inequality, which combines the two previous concepts. 
World inequality refers to income inequality between all individuals in the 
world, irrespective of where they live. The effects of globalization on 
world inequality are both the most difficult to gauge and possibly the most 
interesting. Widening within-country inequality might be more than 
compensated by faster growth of average income in poor countries, so that 
world inequality might go down while within-country inequality increases 
everywhere. Or the reverse may be the case.

In addition to the conceptual problems, there is a substantive issue. 
Whether inequality goes up or down while globalization proceeds is no proof 
of causality. One has to come up with a plausible explanation of the 
channels through which globalization or openness affects inequality, and 
test the theory empirically.

The evidence recently cited in this newspaper purports to show that 
inequality in the world has decreased during the last two decades. Andrea 
Boltho and Gianni Toniolo in the December 1999 issue of Oxford Review of 
Economic Policy calculate that the world Gini coefficient fell from 54 in 
1980 to 50 in 1998. (The Gini ranges between 0 for complete equality and 
100 
if all income is received by a single person.) Boltho and Toniolo’s Gini is 
calculated by looking at cross-country differences in average per capita 
GDP 
(weighted by population size). It is a measure of inter-national, not 
world, 
inequality. But even as a measure of inter-national inequality the 
Boltho-Toniolo estimate is low. Three recent studies—by Schultz in the June 
1998 issue of Journal of Population Economics, Firebaugh in the May 1999 
issue of American Journal of Sociology, and most recently Milanovic in a 
World Bank working paper* estimates that inter-national inequality is some 
10 to 20 percent higher than the Gini reported by Boltho and Toniolo. 
Milanovic, moreover, shows that the inter-national Gini increased between 
1988 and 1993 from 55 to 58. Most likely, the Boltho and Toniolo results 
can 
be explained by their relatively small sample of 49 countries. The other 
studies include at least 80 and some more than 100 countries.

The more serious problem is the difference between inter-national and world 
inequality. The former assumes (e.g.) that all Chinese and all Americans 
have the mean income of their respective nations. Once we allow for 
within-country inequality, that is, for income differences among the 
Chinese, among the Americans, etc., as well as inequality between them, the 
Gini must go up. Including intra-national inequality, Milanovic finds that 
the world Gini coefficient increased from 63 in 1988 to 66 in 1993. If 
purchasing power differences are not taken into account, that is, if we 
simply look at differences in dollar incomes, the Gini increased from 78 to 
80.

Turning to the link between globalization and inequality, most economists 
would agree that while globalization is inevitable and most likely key to 
continued growth, the process of shifting resources to meet new 
opportunities is costly and takes time. Following the adjustment period, 
greater openness probably leads to greater manufacturing employment, at 
least in developed countries. But, even for developed countries, there is 
some evidence, as argued by Dani Rodrik of Harvard University, that 
globalization is responsible for a part of the increased wage gap between 
low- and high-skilled workers. How does openness affect the poor? In a 
recent World Bank paper, Lundberg and Squire** find that greater openness 
to 
trade is correlated negatively with income growth among the poorest 40 
percent of the population, but strongly and positively with income growth 
among remaining groups, in a sample of 38 countries between 1965 and 1992. 
The costs of adjusting to greater openness are borne exclusively by the 
poor, regardless of how long the adjustment takes.

The poor are far more vulnerable to shifts in relative international 
prices, 
and this vulnerability is magnified by the country’s openness to trade. 
Even 
those who have never heard of the WTO, such as poor farmers, are affected 
by 
changes in the prices of their inputs and products. Considering that the 
prices of non-oil commodities have uniformly declined since the beginning 
of 
the 20th century, this bodes ill for poverty and for aggregate 
distribution. 
It also suggests that much more needs to be done to restructure 
liberalization, so that a larger share of the population benefits from the 
process.

The debate on the effects of globalization desperately needs greater 
conceptual clarity and more rigorous empirical testing. We have tried to 
make clear two points. First, world income inequality is much greater than 
the inter-national inequality reported by Boltho and Toniolo; and the 
recent 
trend has been toward increasing inequality. Second, the benefits of 
increased global integration are not necessarily evenly distributed. It may 
be possible to convince the anti-globalization forces of the benefits of 
increased integration, but this will require discussions based more on the 
evidence and less on ideology.

* "True world income distribution, 1988 and 1993: First calculation based 
on 
household surveys alone", World Bank Policy Research Working Paper No. 
2244, 
November 1999.

** "The simultaneous evolution of growth and inequality", December 1999.

The Milanovic and Lundberg-Squire papers can be downloaded from 
http://wbln0018.worldbank.org/research/workpapers.nsf/policyresearch?openform;
 
the Milanovic paper can also be downloaded from http://www.ssrn.com/.





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