Global inequality: worse than reported?
Prevailing measures of global inequality (across countries) “suffer” from downward bias, argues Martin Ravallion. These measures estimate the global distribution of inequality the same way one measures inequality within one country and don’t incorporate gains to economic welfare from living in richer countries:
One can point to reasonable arguments for positive external effects of living in a richer country at given own income. Examples of how this can happen include the likely positive correlation between national income and factors conducive to a higher long-run personal income, better public services, and greater security. None of these gains are likely to be properly reflected in current incomes as measured in surveys.
Global Inequality when Unequal Countries Create Unequal People
Author: Martin Ravallion
From: Georgetown University
…there are economic welfare gains from living in rich countries
Jones and Klenow construct a summary statistic that incorporates consumption, leisure, mortality and inequality and find:
Lower life expectancy reduces welfare by between 15% and 50% in the developing countries we examine. Combined with the findings about West European living standards, the upshot is that, across countries, welfare inequality appears even greater than income inequality.
Growth and well-being: policy should not be based on GDP alone
By: Charles I Jones, Peter J Klenow – Stanford University
