Tuesday, January 5, 2010

World income distribution: not normal

Angry Bear blog is running a theme today on income distributions. I wanted to add my input about global income imbalances here on News N Economics.

On Angry Bear, Tom Bozzo authored The Rich *Are* Different, focusing on the makeup of earnings across US tax payer brackets. And Cactus authors Poverty and the Real Median Income, where he comments on the poverty share and median income across U.S. Presidencies.

So here is where I chime in on a global scale. Using the IMF's World Economic Outlook database (October 2009), one sees how very skewed is average income around the world. And worse, the IMF forecast does not show the disparity improving much (if at all).

The charts above illustrate the frequency distributions for global per-capita income (income divided by population) across 182 countries (you can download my country-level data here, or get all sorts of data from the IMF here). The data are measured in PPP international dollars, which is intended to normalize for currency effects in a period.

Well, it's pretty clear that the distributions are strongly positively skewed, i.e., with relatively few high income values. And furthermore, the non-normality of the global income distribution does not improve during the forecast, 2005-2014 (the IMF forecast ends in 2014).

The table below lists some simple descriptive statistics of the sample.

Admittedly, there are some "slight" improvements: the tails become less "fat", and the distance from the top to the bottom narrows (if one can call dropping from 27,149% to 20,162% a meaningful change).

Income distribution is a serious welfare concern from the country level all the way up to the world - one that apparently is not expected to change anytime soon.

Rebecca Wilder


  1. I could test for the modality - but it is not qualitatively clear that this is the case. Rebecca