1 World Income Distribution and Asian Economic Development: 1820-2003 The International Development Economics Associates (IDEAs) workshop on "Development.

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World Income Distribution and Asian Economic Development: 1820-2003

The International Development Economics Associates (IDEAs)’ workshop on

"Development Experiences and Policy Options

for a Changing World”

3-5th June, 2007

Tsinghua University, Beijing, China

Ikemoto YukioInstitute of Oriental Culture

The University of Tokyo

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Contents

World income distribution: 1820 – 1990

World income distribution: 1990 – 2003

Interpretation

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World Income Distribution 1820-1996

KOKUBUN Keisuke, IKEMOTO Yukio and HAMASHIMA Atsuhiro, "Asian Economic Development in World Income Distribution: 1820-1996," The Memoirs of The Institute of Oriental Culture no.149, 2006.3, pp. 33-56.

http://repository.dl.itc.u-tokyo.ac.jp/ dspace/bitstream/2261/2314/1/ioc14909.pdf

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Assumption

Income inequality within country is neglected. This does not make any significant differences so long as only its trend matters.

National income is expressed in terms of PPP (purchasing power parity).

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Catch-up Process

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Kuznets’ Inverted U-shape

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Income Inequality in the World Income Distribution

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Gini coefficient, 1820 - 1990

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Catching-up: Western countries

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Catching-up: Asian countries

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Theil by region

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Decomposition of Theil Index

Theil Index = Between-region component

+ within-region component

Between-region component = Inequality which ignores inequality within each region

Within-region component = Sum of weighted regional inequality

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Decomposition of Theil: table

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Decomposition of Theil: graph

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Two effects of Asian growth

(1) Asian economies were catching up the Western countries, which decreased world income inequality.

(2) The catching-up process in Asia increased inequality in Asia.

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Conclusion: 1820 - 1990

World income inequality changed as Kuznets’ hypothesis predicted.

World income inequality decreased after the 1980s.

This was brought about by the catching-up process of Asian countries.

However, this, on the other hand, increased inequality among Asian countries.

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World Income Distribution1990-2003

This part is based on

Kurata Masamitsu, “Economic Analysis of Inequality: Reconsideration of Concepts and Estimation of World Income Inequality” March 2007.

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World income distribution, PPP, 1990 and 2003

World Income Distribution, , 1990 and 2003ＰＰＰ

0

10

20

30

40

50

60

70

80

90

100

0 20 40 60 80 100

IndiaChina

India

China

2003

1990

Gini = 0.533

Gini = 0.587

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World Income Inequality

World income inequality decreased after 1990, mainly due to the rapid economic growth of China.

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Changes in Gini coefficientChanges in Gini coefficient

0.5

0.55

0.6

0.65

0.7

0.75

0.8

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

Exchange Rate

PPP

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World Income Distribution, 2003

World Income Distribution, 2003

0

10

20

30

40

50

60

70

80

90

100

0 20 40 60 80 100

Gini = 0.533

Gini = 0.739

PPP

Exchange Rate

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Gini coefficient by regionGini coefficinet by Region, PPP

0

0.1

0.2

0.3

0.4

0.5

0.619

90

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

World

Africa

Asia

Europe

North America

Oceania

South America

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Income distribution in AsiaIncome Distribution in Asia, PPP, 1990 and 2003

0

10

20

30

40

50

60

70

80

90

100

0 20 40 60 80 100

India, 1990

China2003

India, 2003China 1990

Gini = 0.364

Gini = 0.404

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Income Inequality in Asia

Income inequality in Asia also decreased mainly due to the rapid economic growth of China.

This means the Asian economies entered the equalizing phase of Kuznets’ inverted U-shape hypothesis.

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Conclusion: 1990 - 2003

World income inequality decreased very rapidly after 1990s.

This was brought about by the catching-up of Asian countries, especially China.

In this period, inequality within Asia also decreased very rapidly due to the rapid growth of China.

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So what?

Is the equalization of income distribution among countries good?

This does not tell us how people’s life changed. It just suggest the life may improved.

We need to know more about the life of people.

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Interpretation: Marxist view

Japanese exploited Asian people ….?

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Per capita income in Asia

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Income distribution in Asia

Table 2. Income Distribution in Asia

GDP, 2002 Population

(bil.US$) (%) (bil.PPP US$) (%) （Million） (%)

Japan 3,993.4 55.9 3,425.1 21.8 127.5 3.8

Hong Kong 161.5 2.3 182.6 1.2 7.0 0.2

Singapore 87.0 1.2 100.1 0.6 4.2 0.1

South Korea 476.7 6.7 807.3 5.1 47.4 1.4

Malaysia 94.9 1.3 221.7 1.4 24.0 0.7

Thailand 126.9 1.8 431.9 2.8 62.2 1.9

China 1,266.1 17.7 5,860.9 37.3 1294.9 38.6

Philippines 78.0 1.1 333.5 2.1 78.6 2.3

Indonesia 172.9 2.4 682.9 4.4 217.1 6.5

India 510.2 7.1 2,799.6 17.8 1049.5 31.3

Viet Nam 35.1 0.5 185.4 1.2 80.3 2.4

Laos 1.7 0.0 9.5 0.1 5.5 0.2

Total (incl. others) 7,141.1 100.0 15,694.7 100.0 3,357.4 100.0

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Japanese should work harder? Now Japan is no longer the biggest

economy in Asia in terms of PPP. A student commented, “Japanese

should work harder to recover the No.1 position.”

I ask her “What does it mean for Japanese people’s life?”

We are not working for our country to be No.1.

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Neo-classical view Japanese are rich because they are

more productive. Some people misunderstand this as if

it shows “superiority” of Japanese people.

This is “Rational Fool” (Amartya Sen) who cannot distinguish between different concepts; richness and superiority.

Japan has its own problems.

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Increasing Income Inequality in Japan

0.3

0.32

0.34

0.36

0.38

0.4

0.42

0.44

0.46

1960 1970 1980 1990 2000

Original income Disposable income

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Increasing Suicide Rate in Japan

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HappinessQ5 O. LEISURE > VERY/PRETTY HAPPY

Total Gender Age Education

% Male Fem -30.0 30-39 40 +

Japan 39.1 34.6 43.0 37.0 36.2 41.2

South Korea 33.5 34.6 32.3 38.1 30.8 32.2

China 48.2 46.1 50.4 51.1 49.6 46.1

Malaysia 86.6 86.6 86.7 87.4 85.6 86.8

Thailand 69.5 70.4 68.7 70.7 69.6 68.6

Vietnam 39.0 39.7 38.3 45.1 34.5 36.4

Myanmar 71.2 70.0 72.4 74.5 67.2 71.4

India 85.7 82.7 89.1 82.9 89.2 85.6

Sri Lanka 80.7 77.9 83.6 79.5 82.0 80.8

Uzbekistan 49.4 53.6 45.8 58.9 43.0 45.4

Total 60.3 59.9 60.7 64.3 58.7 58.6

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Evaluation of Inequality

Income may not be a good indicator of people’s life.

Income inequality may not indicate inequality of life.

Quality of Life (QOL) Human Development Indicator

(UNDP) Capability Approach by Amartya Sen

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References

(1) Amartya Sen, Inequality Reexamined, 1992.

This book insists to consider inequality in terms of capability rather than income because income is an inappropriate indicator of human well-being. This applies to poverty.

(2) Wilkinson, The Impact of Inequality, 2006.

This book analyzes the impact of inequality on health. In more unequal society, people suffer health problems more.

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Thank

you!