Global Income Distribution

Understanding global income distribution

What is global income distribution?

Income distribution is an economic measurement that looks at the gross domestic product (GDP) of a state and works out how evenly – or otherwise – this is distributed among its inhabitants. GDP is the total monetary value that a country has earned from all of its combined goods and services. However, global income distribution looks at the whole world's economy as a single entity and then assesses the distribution of such earnings across the global population. It does not measure or take into account wealth, however, which has been earned and stored in previous periods. The residual value of land, for example, would not be taken into account but money earned from growing crops on it would be.

 How is global income distribution calculated?

As mentioned, global income distribution means adding up the total value of the world economy in a given period, usually a year, and ascribing a monetary value to it. This is a process that is open to interpretation and different methodologies. However, how such income is then distributed among the people of the world must also be determined, which poses a further problem. Surveying the whole world to work out their income in all forms is not practical, so certain assumptions must be made. Statisticians usually use a Lorenz curve to describe how global income distribution is apportioned. In this, a straight line would occur if everyone on the planet took an equal share of the global economy. The greater the bend of the curve, the more income inequality has been calculated.

What is the Gini coefficient in relation to global income distribution?

This is another statistical tool that helps to explain global income distribution. This coefficient ranges from 0 to 1. If it were zero, then income inequality would be non-existent across the world. In other words, everyone alive would have the same monetary income. If it were 1, then all of the income of the world would be in the ownership of a single individual. Countries have different coefficients which can be used to provide a per capita average that helps to establish the relevant figure for global income distribution.

Does global income distribution reflect inequality around the world?

Yes, it does. Nearly all societies around the world have some form of income inequality. Taken as a whole, the difference between rich and poor countries – those with high and low GDPs – the inequalities are even more pronounced. Those countries with the highest levels of inequalities are in southern Africa as well as South America. Russia and the United States are notable among developed economies for their levels of inequality, too.

What does the World Inequality Report tell us about global income distribution?

The Paris School of Economics produces an annual report into global income distribution which also includes wealth. It is a global data source shows country-by-country comparisons for both income distribution as well as wealth distribution. Their latest report shows that income per adult, as expressed as a proportion of GDP, is lowest in sub-Saharan Africa.

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