Global Income Distribution in 20 Charts

The global distribution of income in 1970-2006 in 20 charts. Not much text. Posting the charts because I thought they were neat…

In the late 1990s I used to follow inequality issues closely, but I’ve now mostly lost interest in the income distribution of the rich countries. After all, why care if the median income of an upper OECD country varies between 93rd and 93.25th percentile of the global distribution ?

But it’s more interesting to compare the income levels in absolute terms in different countries in relation with the global income distribution. The above chart, a global Lorenz Curve, divides the world population into ventiles or 5% blocks, and packs a lot of information into the simple format. That chart and the two following come from Branko Milanovic some of whose descriptions I paraphrase :

• In 2005, the poorest 5% of the US population were richer than the bottom 60% of the world population. The US income distribution spans 40 global percentiles, which are (relatively) few compared with….
• Brazil, a true microcosm of the world, contains the poorest 1% of the world as well as the richest 1%. (It’s not for nothing, Brazil’s reputation.) But it also has a pretty big middle class, by world standards.
• According to Milanovic, “…the Chinese top ventile attains almost the 80th percentile of the world’s income distribution. If we used percentiles, the top 1% of the Chinese would be better-off than 93% of the world population.”
• The average income of India’s richest ventile is only about as comparable as the USA’s bottom ventile. The top 1% of Indians “would not go past the global 80th percentile”.

For developing countries, global ventiles don’t convey fine-enough information to show how their very richest compare with the rest of the world. Yet some very poor countries do have people who are fabulously and opulently rich even by OECD standards. Also, the charts are all based on 2005 data. The patterns would probably look substantially different already in 2014. Unfortunately, household income information from around the world is not available regularly, so this lag can’t be helped.

With a different set countries also in 2005 :

Germany’s poor do extremely well by any standard… and the poorest third or so of Argentinians are poorer than the poorest third of Albanians ?! That can’t be a bias in favour of Albania ; Milanovic is a Serb…

Just for a look at African countries in perspective :

The three previous charts showed one of the most common ways to represent income distribution, the Lorenz Curve, which is a cumulative distribution function. Sometimes, however, it’s more interesting to look at income in terms of density distributions. Think of the bell curve of the normal probability distribution.

Unless specified otherwise, the following charts are taken from Maxim Pinkovskiy and Xavier Sala-i-Martin, “Parametric Estimations of the World Distribution of Income“.

In all cases, the X-axis shows incomes in 2000 international (PPP-adjusted) dollars, and the Y-axis displays population in absolute figures. The vertical lines indicate the standard incomes at $1 and $2 per day. The latter amount represents the UN-defined global poverty threshold.

Note : In some charts, either axis or both show values in log scale, depending on how big a range the numbers have.

Generally, wider the curve, the more unequal is the distribution of income. The taller the peak of the curve, more people are earning the income specified on the X-axis. If the entire curve is moving to the right over time, it means the population as a whole is getting richer.

Notice the world used to be almost tri-modal (three-peaked) but became slowly more bimodal, and now is almost uni-modal. Three separate worlds are blending slowly.

Here’s what it looks like when everyone’s income grows pretty rapidly — the peaks get taller, but the curves are narrower and more shifted to the right :

For China, there’s been progress over time but with a somewhat different pattern. Starting from a lower base the whole curves are moving to the right (everyone is making more money), but they get wider (incomes are more unequal).

I’ve argued before that progress in India started a little earlier than when the neoliberal reforms are conventionally dated (usually to 1991, but sometimes as early as 1985) :

Much more common in the world is progress that’s less dramatic, without income inequality changing all that much. Notice both Mexico and Brazil have very wide income distributions whose width hasn’t changed over time by very much. In the three following examples, the right half of the distribution has shifted right much more than the left half.

This chart comes from a different paper which uses standardised values for income, limiting comparability with the other charts here. But still the modest change in the African income distribution over time is evident :

Here’s what a really bad regression looks like — the right tail has shifted dramatically to the right but the left tail shifted just as dramatically in the opposite direction, and the centre of the curves hasn’t moved much to the right. The number of people earning close to the average income has fallen over time.

This shows how modest, in global terms, are the changes in the US income distribution. Of course the log-scale on the X-axis goes all the way up to $500,000 so the changes are not as modest as they look.