World inequality

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World inequality

• Many attempts to estimate inequalities among
  world citizens
• Schultz T.P. (1998), Sala-i-Martin (2002),
  Bourguignon Morrisson (2002), Milanovic (2003)
• Inequality between countries (average citizens)
• Inequality between countries weighted by
  population
• Inégalités between citizens (within country
  inequality) today between makes around 60 of
  total (10 in 1820 cf. Bourguignon Morrisson,
  2002, AER)
• ? Migrations ? (foreign born) ? Inequality of
  opportunity linked to place of birth

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Worldwide inequality of opportunity
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Globalization and world inequalities

• 1500-1870 
• After Braudel, Bairoch, etc., Pomeranz (2000),
  Acemoglu et al.
• - Role of colonial trade for European take-off
• - Reversal of fortune, colonial legacy in the
  Americas, in Africa (slave trade)
•  1st Globalization  of 1870-1913  (cf.
  Williamson, ORourke)
• Convergence within atlantic economy (trade?,
  capital, migrations)
• Divergence elsewhere, except Japan
• Globalization of 1980-onward inequality
  reduction?
• Controversial Sala-i-Martin vs. Milanovic,
  Bhalla vs. Ravallion
• - Many methodological sources of uncertainty
• - Weight of China and of India (growth and
  inequality evolutions)
• - Increasing weight of Africa

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Openess and inequalities

• Within-country inequalities
• HOS 222 model ? ? inequality in the South, ? in
  the Nord
• With international factor mobility 
  substitution with trade (Mundell)? similar
  effects of investment or migration
• Outside 222?
• - More than 2 factors  capital/skilled
  lab./unskilled lab. migration South?North of
  skilled labor
• - More than 2 countries competition between
  developing countries ? protection of unskilled
  labor intensive sectors in intermediate income
  countries (Mexico, Brazil, Morocco)
• - More than 2 sectors FDI in consumer goods or
  natural resources ? skilled labor demand
• Besides, factors distribution matters, for
  instance land
• Inequality between countries
• In comparative statics, level convergence under
  usual assumptions
• But the true problem is growth convergence
• Endogenous growth models give mixed conclusions

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2 polarized views on International Justice (1)

• 1
• Peoples freely self-determine into sovereign
  states with common values, institutions and
  development policies for which they are
  collectively deemed responsible
• National particularism strand
• National interest motive for foreign aid and
  other policies
• Makes national governance and failing states
  the big issue

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2 polarized views on International Justice (2)

• 2
• Inequality of opportunities linked to the country
  of birth is morally irrelevant and as such should
  be compensated by a well-organized society of
  nations
• Cosmopolitan strand (Sens grand
  universalism)
• Redistribution motive for aid or other northern
  policies
• Makes national handicaps due to geography or
  history the big issue, and also international
  migration

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Rawlsian international solidarity

• Rawls proposal Duty of assistance to peoples
  under unfavorable conditions that prevent them
  from having a just or decent political and social
  regime (The Law of Peoples, 1993)
• Lies in-between the 2 polarized views, in line
  with the MDGs consensus
• fight against absolute poverty
• support to weak national institutions
• Disregards issues of global redistribution

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International economic policies

• However developed countries policies raise issues
  of allocation of trade advantages, migration
  inflows, foreign aid amounts
• that still call for international distributive
  justice principles between peoples (or national
  representative agents)
• Note Most international transfers are not
  targeted towards individuals within countries,
  unlike, e.g., humanitarian aid

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Trade, investment, migration, aidand world
inequalities(figure Cogneau Lambert, 2005)
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Trade policies Tariff and non-tariff barriers
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Migrations policies?
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International allocations (1)

• National poverty Y Y ( C, NP, IP) R
• C circumstances (geography, history)
• NP national policy or institutions
• IP international policy, e.g. foreign aid
• R residual (better than responsibility)
• Assuming (provisionally) that NP does not depend
  on IP (e.g., policy reforms are not affected by
  foreign aid) ? see optimal fiscal policies
  literature

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International allocations (2)

• Collier Dollars (2001) framework
• 1. Y in 2015 Y0 . g(NP,IP) C
• g1gt0, g2gt0, g22lt0 and g12gt0
• 2. Minimize global poverty in 2015 S Y, s.t. S
  IP fixed
• Solution IP IP(Y0,NP), IP1gt0 and IP2gt0
• i.e. give aid to poor countries with good
  policies
• (World Bank (IDA) and US Mill. Chall. Acc.
  allocations)
• g(P,A) 1-eit.(ß Pit-1 a1.Ait-a2.Ait²?.AitxPit-
  1)
• Ait 2,6.Pit-1(?t/0,07).(1/?it
  ).(yit/Hit).Nit0,32
• A donor (or tax-payer) utilitarian perspective?
• Assumes all poor are the same (disregards C)
  except for NP, for which they are deemed
  responsible ethically debatable impact of the
  growth-elasticity of poverty
• Dynamically inefficient
• Inequitable under some alternative assumptions

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International allocations (3)

• Alternative equality of opportunity solutions
• (Cogneau Naudet, 2004 Llavador Roemer,
  2001)
• Keeping Y in 2015 Y0 . g(NP,IP) C
• Minimize Min Y in 2015, s.t. S IP fixed
• C poverty prospects without aid between 0 and
  2015
• NP E NP Y0 ,C is also a circumstance
• Solution IP IP(Y0, C), IP1gt0 and IP2gt0
• i.e. give aid to poor countries with poor
  prospects
• IP may reduce global poverty almost as
  effectively as IP while sharing out poverty
  risks much more fairly among the worlds
  population

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Development Economics and International Justice

• Positive knowledge may help
• 1. Different normative approaches lead to
  allocations that can be either close or far in
  practice, depending on (beliefs about) the value
  of parameters
• Causal impacts of C, NP and IP on Y
• 2. Feasibility sets also constrain the
  allocations
• NP as a function of IP and/or C ? incentives,
  etc.
• 3. The national citizenship framework is
  limiting
• What room for international migration policies?

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Simulation dallocations normatives sur
1996-2004(Chauvet, Cogneau Naudet)

• Hit1 Hit 1-eit.(ß Pit a1.Ait-a2.Ait²?.AitxP
  it)
• Collier et Dollar
• Ait 2,6. Pit (?t/0,07).(1/?it
  ).(yit/Hit).Nit0,32
• ? function of Hit and of initial inequality
  (Bourguignon, 2003), other variables as observed,
  ? adjusted to match observed total aid amount
• Cogneau et Naudet
• Hie Hit 1 - eit.gite- eit.(a1.Ait - a2.Ait²
  ?. Ait x CPIAit-1) T-t
• gite ?lnyit ß Pit, averaged over t-10 t
  (natural reward)
• Amaxit (a1?.Pit)/2a2
• Min Max Hie (Ait) i such as Ait lt Amaxit

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Allocations normatives simulées et aide observée
(1996-2004) (1)
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Allocations normatives simulées et aide observée
(1996-2004) (2)
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Influence des critères doptimalité sur
lallocation réelle 1996-2004
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Influence des critères doptimalité sur
lallocation réelle par bailleur
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Elasticities of Poverty

• Absolute Poverty F (Average income, Income
  Inequality, Poverty Line)
• Growth- and Inequality- elasticities of poverty
  (Ravallion, 1997)
• Bourguignon (2002)  log-normal approximation
• H Np/N F (Elny lnz) / s
• F ln(Ey/z)/s s/2