World inequality is declining

Overall economic welfare depends on both the quality and the quantity of life: yearly income and the number of years over which that income can be enjoyed. As a result, international income inequality is decreasing after gains in life expectancy are taken into account, says economist Gary S. Becker.

Becker and other researchers assigned monetary values to the longevity gains experienced by dozens of countries between 1965 and 1995 and combined them with normal per-capita income data to assess the differences in welfare worldwide. They found:

Longevity gains accounted for 55 percent of the 1965 gross domestic product (GDP) per capita in developing countries, versus 29 percent for developed nations.

The average growth rate of "full" income – which includes life expectancy gains – is about 192 percent for developing countries, compared to 140 percent for developed countries.

Countries with higher initial income tended to have lower subsequent "full income" gains than countries that started out poorer.

Thus, the overall growth in life expectancies between 1965 and 1995 worked to reduce the disparity in welfare across nations. Global income inequality is decreasing and people in developing countries are experiencing more prosperity than some critics acknowledge.

Source: Gary S. Becker et al., The Quantity and Quality of Life and the Evolution of World Inequality, Working Paper 9765, June 2003, National Bureau of Economic Research.

For text http://www.nber.org/papers/w9765

For more on Economic Growth http://www.ncpa.org/iss/int/

FMF Policy Bulletin\23 September 2003