World-Economic Trends in the Distribution of Income, 1965-1992

Abstract

This article assesses trends in world income inequality between 1965 and 1992. The study first decomposes Theil's T to show that between-country inequality is the most significant component of overall world income inequality, which facilitates fruther research, as between-country longitudinal data are more easily available than national income distribution data. Next, the study uses a larger set of nations and finds a signigicant increase in world income inequality as measured by both Gini and Theil coefficients, particularly during the 1980s. The findings are robust even after controlling for differential rates of population growth or using alternative sources of data. By indentifying these trends, the article is able to explain past discrepancies and recent shifts in the relevant empirical and theoretical literature.