Rising levels of inequality has become a key political issue in recent years; "the defining issue of our time," as Barack Obama described it back in 2013. It was at the heart of the Occupy movement protests, and has received a huge amount of attention in the media and in policy circles. But much of this discussion has focussed on what's been happening in rich countries, in particular upon trends seen in the US. We tend to hear less about inequality in the rest of the world.
How has income inequality within countries been changing around the world more generally?
To answer this question, we brought together estimates of income inequality for two points in time: today and a generation ago in 1990. Our metric of income inequality is the Gini index – explained here – which is higher in a country with higher inequality.
We rely on estimates from two online databases: PovcalNet, run by the World Bank, and the Chartbook of Economic Inequality, which I published together with Tony Atkinson, Salvatore Morelli, and Max Roser. This gave us a sample of 83 countries, covering around 85% of the world's population.
The chart below compares levels of inequality today with those one generation ago. If you've not seen this sort of chart before, it may take a moment to understand what's going on. How high a country is in the chart shows you the level of inequality in 2015. How far to the right shows you the level of inequality in 1990. In addition, a 45 degree line is plotted. Countries below this line saw a fall in the Gini index between the two dates; countries above saw an increase.
So what does the chart tell us about inequality within countries across the world?
No general trend to higher inequality:
It's a mistake to think that inequality is rising everywhere. Over the last 25 years, inequality has gone up in many countries and has fallen in many others. It's important to know this. It shows that rising inequality is not ubiquitous, nor inevitable in the face of globalisation, and suggests that politics and policy at the level of individual countries can make a difference.
Note the diversity between countries:
As well as there being different trends, notice how very different the level of inequality is across countries. The spread you see – from the highest inequality countries in Latin America and Sub-Saharan Africa, to the lowest-inequality countries in Scandinavia – is much larger than the changes in individual countries over this period.
There are clear regional patterns:
To bring this out in the chart you can highlight particular regions by clicking on the labels in the legend on the right side.
Almost all Latin American and Caribbean countries show very high levels of inequality, but considerable declines from 1990 to 2015.
Conversely, advanced industrial economies show lower levels of inequality, but rises in most, though not all, instances.
A number of Eastern European countries experienced rising inequality as they transitioned from socialist regimes.
Across the six countries in our sample from the Middle East and North Africa region, we mostly see falls. In Sub-Saharan Africa and East Asia and Pacific, the trends are more mixed.
Across countries, the average level of inequality has not changed: The rises and falls seen in the Gini index in different countries more or less cancel out, the average Gini across countries fell marginally from 39.6 to 38.6.
There were rises in inequality in some of the world most populous countries, including China, India, the US and Indonesia (together accounting for around 45% of world population). As a result, if we weight countries according to the size of their population we see that this weightedaverage Gini index increased by four percentage points, from 36.7 to 40.8.
This means that, whilst in terms of the average country the Gini index stayed roughly constant across the two periods, the average personlived in a country that saw rising inequality.
Levels of inequality are converging:
Interestingly, the chart shows that there was some convergence in inequality levels across countries over the last 25 years. Amongst those countries with a Gini index below 40 in 1990 (left half of the chart), hardly any saw substantial falls to 2015. Amongst those with a Gini index above 40 in 1990 (right half of the chart), hardly any saw substantial rises. As already pointed out, this apparent convergence works largely through regional dynamics. That said, those countries in our sample from the Sub-Saharan Africa and East Asia and Pacific regions are more evenly split between rising and falling levels of inequality, but still roughly fit this convergent pattern.
Have you read?
The Gini index is just one of the many ways we can measure inequality, each with their own pros and cons. You can read more about this in the 'Further notes' section below, as well as in our entry on Income Inequality.
Nevertheless, it is clear from the chart we cannot make generalisations about inequality across the globe based on what we see in rich countries. Nor should we limit ourselves to thinking inequality must either be going up or going down, full stop. Posing the question in such a polarised way precludes a meaningful answer. Whether inequality is rising or falling depends on where, when and what aspect of inequality we have in mind.
But this is very important to know in itself. It shows us that rising inequality is not just an inevitable outcome of global economic forces, completely beyond our control. National institutions, politics and policy play a key role in shaping how these forces impact incomes across the distribution. Being attentive to the differences between countries is an important step in knowing what can be done to reduce inequality.