Xavier Sala-i-Martin on Global Inequality

"The estimates of a WDI for the 1970–2000 period result in a number of interesting lessons.

First, global poverty rates, defined as the fraction of the WDI below a certain poverty line, declined significantly over the past three decades. We have documented this claim for the four most widely used poverty thresholds. Poverty rates were cut by a factor of almost three, according to all four poverty lines, and the total decline in poverty head counts was between 212 million and 428 million people. We have shown that this is also true for all conceivable poverty lines.

Second, the spectacular reduction of worldwide poverty hides the uneven performance of various regions in the world. East and South Asia account for a large fraction of this success. Africa, on the other hand, seems to have moved in the opposite direction.

Third, after remaining constant during the 1970s, inequality declined substantially during the past two decades. The main reason is that incomes of some of the world’s poorest and most populated countries (most notably China and India, but also many other countries in Asia) converged rapidly with the incomes of OECD citizens. This force has been larger than the divergence effect caused by the dismal performance of African countries.

Fourth, the decomposition of inequality into "within-country" and "across-country" components reflects that within-country inequality increased over the sample period. However, the decline in across-country inequality more than offset the first effect and delivered an overall reduction in global income inequality.

In 2000, the United Nations established the Millennium Development Goals. Kofi Annan challenged national leaders around the world to adopt the target "of halving the proportion of people living in extreme poverty, and so lifting more than 1 billion people out of it, by 2015."[17] Table I shows that the $1.50 per day poverty rate in 1990 was 10 percent. The Millennium Development Goals will be achieved, therefore, when poverty rates are 5 percent, and we have seen that the poverty rate in 2000 was 7 percent. Thus, when the goal was established in 2000, the world was already 60 percent of the way toward achieving it. The world might just be in better shape than many of our leaders believe."

- Global Inequality Fades as the Global Economy Grows, from the The Heritage Foundation/WSJ 2007 Index of Economic Freedom

Via PSD blog

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