World Income Distribution and Asian Economic Development 1820

World Income Distribution and Asian Economic Development: 1820 -2003 The International Development Economics Associates (IDEAs)’ workshop on "Development Experiences and Policy Options for a Changing World” 3 -5 th June, 2007 Tsinghua University, Beijing, China Ikemoto Yukio Institute of Oriental Culture The University of Tokyo 1

Contents n World income distribution: 1820 – 1990 n World income distribution: 1990 – 2003 n Interpretation 2

World Income Distribution 1820 -1996 KOKUBUN Keisuke, IKEMOTO Yukio and HAMASHIMA Atsuhiro, "Asian Economic Development in World Income Distribution: 1820 -1996, " The Memoirs of The Institute of Oriental Culture no. 149, 2006. 3, pp. 33 -56. http: //repository. dl. itc. u-tokyo. ac. jp/ dspace/bitstream/2261/2314/1/ioc 14909. pdf 3

Assumption n n Income inequality within country is neglected. This does not make any significant differences so long as only its trend matters. National income is expressed in terms of PPP (purchasing power parity). 4

Catch-up Process 5

Kuznets’ Inverted U-shape 6

Income Inequality in the World Income Distribution 7

Gini coefficient, 1820 - 1990 8

Catching-up: Western countries 9

Catching-up: Asian countries 10

Theil by region 11

Decomposition of Theil Index = Between-region component + within-region component Between-region component = Inequality which ignores inequality within each region Within-region component = Sum of weighted regional inequality 12

Decomposition of Theil: table 13

Decomposition of Theil: graph 14

Two effects of Asian growth (1) Asian economies were catching up the Western countries, which decreased world income inequality. (2) The catching-up process in Asia increased inequality in Asia. 15

Conclusion: 1820 1990 n n World income inequality changed as Kuznets’ hypothesis predicted. World income inequality decreased after the 1980 s. This was brought about by the catching-up process of Asian countries. However, this, on the other hand, increased inequality among Asian countries. 16

World Income Distribution 1990 -2003 This part is based on Kurata Masamitsu, “Economic Analysis of Inequality: Reconsideration of Concepts and Estimation of World Income Inequality” March 2007. 17

World income distribution, PPP, 1990 and 2003 18

World Income Inequality n World income inequality decreased after 1990, mainly due to the rapid economic growth of China. 19

Changes in Gini coefficient 20

World Income Distribution, 2003 21

Gini coefficient by region 22

Income distribution in Asia 23

Income Inequality in Asia n n Income inequality in Asia also decreased mainly due to the rapid economic growth of China. This means the Asian economies entered the equalizing phase of Kuznets’ inverted U-shape hypothesis. 24

Conclusion: 1990 2003 n n n World income inequality decreased very rapidly after 1990 s. This was brought about by the catching -up of Asian countries, especially China. In this period, inequality within Asia also decreased very rapidly due to the rapid growth of China. 25

So what? n n n Is the equalization of income distribution among countries good? This does not tell us how people’s life changed. It just suggest the life may improved. We need to know more about the life of people. 26

Interpretation: Marxist view Japanese exploited Asian people …. ? 27

Per capita income in Asia 28

Income distribution in Asia 29

Japanese should work harder? n n Now Japan is no longer the biggest economy in Asia in terms of PPP. A student commented, “Japanese should work harder to recover the No. 1 position. ” I ask her “What does it mean for Japanese people’s life? ” We are not working for our country to be No. 1. 30

Neo-classical view n n Japanese are rich because they are more productive. Some people misunderstand this as if it shows “superiority” of Japanese people. This is “Rational Fool” (Amartya Sen) who cannot distinguish between different concepts; richness and superiority. Japan has its own problems. 31

Increasing Income Inequality in Japan 32

Increasing Suicide Rate in Japan 33

Happiness 34

Evaluation of Inequality n n n Income may not be a good indicator of people’s life. Income inequality may not indicate inequality of life. Quality of Life (QOL) Human Development Indicator (UNDP) Capability Approach by Amartya Sen 35

References (1) Amartya Sen, Inequality Reexamined, 1992. This book insists to consider inequality in terms of capability rather than income because income is an inappropriate indicator of human well-being. This applies to poverty. (2) Wilkinson, The Impact of Inequality, 2006. This book analyzes the impact of inequality on health. In more unequal society, people suffer health problems more. 36

Thank you! 37