Global Economic Development Class

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Global Economic DevelopmentClass 8
Question Will inequality between people increase
or decrease in the next decades? (Related
question what happened in the last 20 years?
Chen and Ravallion, Milanovic, Sala I Martin)
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In other words will happen to world inequality
what happened to country inequality Kusnetz
curve?
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Marx saw that income inequality in UK was
growing. He concluded that capitalism could not
survive. Wade (in the article) says basically the
same, but for the world world inequality is
growing. He concludes that things can not
continue like this. But Marx was wrong. After a
while income inequality diminished in UK.
(Similar trends happened in other now developed
countries). Lucas argue that the same will happen
with world income inequality! But what happened
in the last 25 years?
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(No Transcript)
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Milanovic Rising inequality. But period too
short 1988-1993. Problem national accounts vs.
household surveys. National accounts are
aggregates Household surveys are more precise (it
is a representative sample) but there they have
errors and omissions, especially in wealthy
people income! By the way Apparently, it
increased especially in Africa, in rural China
and in rural India. It seems odd to regard such
regions as victims of globalisation. On the face
of it, they are rather the opposite victims of
lack of globalisation. Easy to refute!
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• Will world inequality increase or decrease in the
  future?
• If more and more countries start growing at fast
  pace, it will decrease (Lucas)
• If Africa does not start growing it will
  increase (Sala I Martin)
• If most countries grow, but at slower or equal
  pace than most advanced countries, then
  inequality will be roughly constant
• Growth seems to be the key. Also, the growth
  should be fairly broad (extended to most people
  in a country).
• Main lesson
• Communication in the whole world increased and
  will continue increasing.
• As people in poor countries notice how people
  in rich countries live, they will put pressure in
  governments for placing growth institutions.
• The main objective of government would be to
  solve conflicts that can undermine these
  institutions and slow down growth.