试听180秒082：Levels of Inequality around the World

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Hello, Himalaya’s subscribers.My name is Timothy Taylor, and today we're going to discuss measuringinequality around the world. We've been talking in the last few lectures abouthow China still has some very poor people, although their numbers have beendeclining. China also has some very rich people. Imagine you took all thepeople in the world and you lined them up in an order of their total worth. Andby total worth, what I mean is you add up all the value of all their financialassets, like ownership of stock in companies or other financial investments,and other non-financial assets, like owning property.

And you need to subtract off anydebts, of course, to do this calculation. And I want you to just focus on thoseat the very top of the pile in total wealth, the top one percent in the world,about four million people from China would be in this category of the top onepercent in the world in total wealth. In rough numbers, these people each haveat least five or six million yuan in total worth. This is inequality. Some arepoor, some are rich. We know what happens in China. We know what happens incountries all over the world. So let's talk more about it. First, how doeconomists measure inequality? Second, how has inequality been changing inChina? And third, we'll talk about shifts in the global pattern of inequality.

And of course, what's happened in China is a big part of those globalshifts. Let's start with our first point on measuring inequality. If you'regoing to think like an economist, you don't just want to say inequality exists.Of course it does. That's not much of an insight. Instead, you want to measureinequality and say in some way how it’s rising or falling or staying the same.And the usual starting point here is to divide up the distribution of incomeinto pieces. For example, say we look at the income for all the households inan economy, and we divided up into five parts. So we could calculate what shareof total income goes to those in the bottom fifth. What share goes to those inthe second fifth, the middle fifth, the fourth fifth, and the top fifth? Ofcourse, you don't have to divide up the population into fifths.

I just described it that way as an example. And it's often done that way.But you could divide up into tenths and look at each tenth of the incomedistribution. Or you could divide it into twenty sections and look at each fivepercent of the distribution. Or you could divide up into one hundred differentsections called percentiles. Whatever division you use, you can then makestatements like how much did the top fifth or the top tenth, or the top onepercent getting some years compared to other years? Anotherthing that happens sometimes is to look at the person in the ninetiethpercentile, say that is ten percent of the population is above that level andninety percent is lower. And you compare the income in the ninetieth percentileto the income, say the fiftieth percentile, right in the middle of the incomedistribution, or maybe to the tenth or twentieth percentile down near thebottom. And you say, is this ratio of the ninetieth to the tenth, or theninetieth to the fiftieth expanding or contracting over time? Now, all this canbe useful.

There's one way of boiling down all these different kinds of inequalityinto a single factor, which is called a Genie coefficient. Now, I'm not goingto try to explain the exact calculation here for a Genie coefficient. It's notvery hard, but it's hard to do without showing you a graph and doing a bit ofalgebra. So I just want you to sort of think about the basic idea this way. Thisis an idea that it's called the genie coefficient, because it was first putforward by an Italian economist named Corrado Genie back in 1913. Think of the inequality this way， if one personpersonally got 100% of all income in aneconomy, that is the maximum amount of inequality that's possible. And we willcall that a genie coefficient of 100. On the other side. Let's say thateveryone had exactly the same income in an economy that would be the maximumamount of equality that's possible. And we're going to call that a geniecoefficient of zero. So the genie coefficient will be between perfect equalityof zero and perfect inequality of one hundred.

And of course, countries fall between these two extremes. Um, and you canthink about this by putting, say, income and percentiles income on a graph. Ifincome was perfectly evenly distributed, then it would be true. The bottom onepercent of the population has one percent of total income, the bottom fivepercent, the population has five percent of total income. The bottom fiftypercent has fifty percent of total income, and so on, right up to the top. Thatwould be true if everyone had exactly equal shares. And you could put that on agraph. So the question is, how close is the actual distribution of income in aneconomy to that perfect equality?

And so, on a graph, you can look at the distance between the perfectequality line and whatever the actual data shows you. And the area betweenthose two lines is called a genie coefficient. I hope that made a little bit ofsense, at least. But I'm really trying to convey to you is that a geniecoefficient tells you how close you are to perfect quality. If you're exactlyat perfect equality, it's zero. And if you're as far away as possible fromperfect equality, it will be one.

Now let's talk about our second point：inequality in China. As we'vealready mentioned earlier, China's seen a dramatic fall in poverty in the lastforty years, and also a rise in inequality. It's not a shock that those two gotogether. We've already talked about the process behind the kuznets curve withits observation that many economies, as they grow first see a rise ininequality and then a fall. Economic growth is like a rising tide are all butnot all boats rise by the same amount Economic growth is not like a balloon,whereas the balloon is inflated. It expands equally in all directions. Insteadeconomic growth tends to pop up in certain places are certain industries it'llbe faster there for a time and then growth shifts to other places. In otherindustries. Economists sometimes use the metaphor that economic growth is likemushrooms which pop up in certain places. And this seems like a good metaphorfor economic growth in China. The last time I looked at the data total worldproduction of mushrooms was about ten million tons per year. And China producedabout three quarters of that total. If you go back to about 1980, the genie coefficient in China was about 30. Byabout 2008, the genie coefficient was up to 50. And then it since then, it'sdropped down to about 45.

Now, for comparison, a genie coefficient of about thirty is at the low endof inequality for countries around the world. Today. It's similar to the levelof inequality in Norway, in Germany and Pakistan, a genie coefficient aroundfifty would be near the high end of countries around the world today. Theregion with the most inequality usually is Latin America, and countries likeBrazil and Mexico have a genie coefficient around fifty. The U.S. economy has agenie coefficient around 40, so that's high compared to many western Europeancountries. It's lower than many Latin American countries and China fallssomewhere in the middle there.

Now I should probably add here that as we've talked before, all economicstatistics are somewhat imperfect. We talked about problems with statistics forgross domestic product on inflation and unemployment and others. But geniecoefficients can be really messy because they depend on how well countriescount income across the entire population, which is not easy to do in middleincome and low income countries. So I think these numbers are reasonable roughguide, but you would be incorrect to think they are very precise. If you breakdown China's income distribution a little more detailed way. One of the thingsyou see is that from 1980 up until about 2008, the share of total income going to the top tenpercent in China was rising pretty quickly. And the share going to the toptwenty percent was also rising. But since about 2008, the share going to thetop ten percent has been falling. And meanwhile, the share in the middle partsof the income distribution, the fourth, fifth, sixth, and seventh tenths hasbeen rising most quickly. Now, to understand those statements, make sure wehold the meaning of inequality in mind.

In general, China's had very large gains in income on average over the lastforty years. So what I'm saying is up to about 2008 gains for the top tenpercent and twenty percent were even larger than average. So the share of totalincome for those groups is rising. Since 2008, there have been gains for thetop ten and twenty percent, but the gains have tended to be faster for those inthe middle. So the share of total income going to the middle has been arising,and the share going to the top group has fallen. Again. Inequality is not aboutabsolute growth. It's about which groups are growing faster or not as fast atdifferent times. It's about where are the mushrooms of economic growth poppingup in the economy.

Let's move to our third theme, shifts in global income inequality. Let's goback to before China's economic reforms started back to the 1960s and early 1970s.And at that point, let's say we drew out the pattern of income for the globaleconomy. How many people have different levels of income? Well, that patternback in the 1960s was a graph that had two humps. One hump was near the lowestlevels of income in the world. All those poor people in low income countriesaround the world are Africa, South Asia, including India, Latin America, EastAsia, including China. Then there was a smaller number of people in the middleof the global income distribution, uh, what we might call the middle incomecountries or the global middle class. Then there was a hump of people in theupper part of the income distribution, including the United States, countriesof western Europe and others. So the global distribution of income back in the 1960swas quite unequal. There was a group at the top, a group at the bottom, and notso many in between. But the dramatic rise in economic growth in China has changedthat pattern.

China is the leading example, but other countries have also seen theireconomies grow from low income to middle income status, including uh India,Nigeria, Pakistan, Indonesia. It looks as if Bangladesh may be about to growout of low income status and join middle income status next. So now if we do agraph of the pattern of income in the global economy showing people atdifferent income levels, it doesn't have two humps any more instead of one bighump near the bottom of the income distribution, and another big hump near thetop of the income distribution, now there's just one hump, and it's in themiddle.

Now, this is a long way of making really kind of a simple point because ofthe growth of China's economy along with other middle income countries, theglobal distribution of income has become much more equal. Now, if you'resomeone who just doesn't worry very much about inequality, I guess this won'tmatter to you. But I find it kind of interesting. Inequality inside countrieshas been rising, higher in China, higher in India, higher in the United States,higher inside countries of western Europe. Mushrooms of growth have beenpopping up in different places in different ways.

And of course, the exact situation in each country depends on details forthat country, and it depends on the extent to which governments in differentcountries have reacted to the rise in inequality by changing rules about taxesand payments to individuals, and rules that might affect wages throughout aneconomy. But the overall pattern is clear. Many countries around the world havebeen having a real rise within country inequality, but for the global economyas a whole, there's been a reduction in global inequality. Indeed, you couldsay that if the middle income countries of today had not had their rise inwithin country inequality coming from there, faster economic growth rates, thenglobal inequality would not have been able to fall.

Let's end here with a few review questions. How is economic inequalitymeasured with percentiles or with a genie coefficient? In China how arepatterns of inequality been shifting in recent decades? And can you explain whyit is that within country inequality has risen indeed recent decades, at thesame time that global income inequality has been falling.

In the next lecture, we'll talk in more detail about causes of inequalityand possible policy solutions for reducing inequality both in China and aroundthe world.

I'm Timothy Taylor. Thank you for listening to Himalaya.