International Inequality - International Wealth Distribution

International Wealth Distribution

A study by the World Institute for Development Economics Research at United Nations University reports that the richest 1% of adults alone owned 40% of global assets in the year 2000, and that the richest 10% of adults accounted for 85% of the world total. The bottom half of the world adult population owned barely 1% of global wealth. Extensive statistics, many indicating the growing world disparity, are included in the available report, press releases, Excel tables and Powerpoint slides.

The major component of the world's income inequality (the global Gini coefficient) is comprised by two groups of countries (called the "twin peaks" by Quah ).

• The first group has 13% of the world's population and receives 45% of the world's PPP income. This group includes the United States, Japan, Germany, the United Kingdom, France and Australia, and comprises 500 million people with an annual income level over 11,500 PPP$.
• The second group has 42% of the world's population and receives only 9% of the world PPP income. This group includes India, Indonesia and rural China, and comprises 2,100 million people with an income level under 1,000 PPP$. (See Milanovic 2001, p. 38).

Economic inequality very closely matches lognormal distribution as one traverses the strata of national and world societies from top-to-bottom.

During the 20th century there was considerable divergence between the economic wealth of developed and developing countries. Richer countries like the United States and many European countries converged together towards a GDP per capita much greater than developing countries such as India and Ethiopia.

The evolution of the income gap between poor and rich countries is related to convergence. Convergence can be defined as "the tendency for poorer countries to grow faster than richer ones and, hence, for their levels of income to converge" . Convergence is a matter of current research and debate, but most studies have shown lack of evidence for absolute convergence based on comparisons among countries (with regard to this debate see for instance Cole and Newmayer (2003) or ).

According to current research, global income inequality peaked approximately in 1970s when world income was distributed bimodally into "rich" and "poor" countries with little overlap. Since then inequality have been rapidly decreasing, and this trend seems to be accelerating. Income distribution is now unimodal, with most people living in middle-income countries.