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World Income Distribution and Asian Economic Development: 1820-2003

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

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World Income Distribution and Asian Economic Development: 1820-2003

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  1. 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” 3-5th June, 2007 Tsinghua University, Beijing, China Ikemoto Yukio Institute of Oriental Culture The University of Tokyo

  2. Contents • World income distribution: 1820 – 1990 • World income distribution: 1990 – 2003 • Interpretation

  3. 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/ioc14909.pdf

  4. Assumption • 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).

  5. Catch-up Process

  6. Kuznets’ Inverted U-shape

  7. Income Inequality in the World Income Distribution

  8. Gini coefficient, 1820 - 1990

  9. Catching-up: Western countries

  10. Catching-up: Asian countries

  11. Theil by region

  12. Decomposition of Theil Index 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

  13. Decomposition of Theil: table

  14. Decomposition of Theil: graph

  15. 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.

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

  17. World Income Distribution1990-2003 This part is based on Kurata Masamitsu, “Economic Analysis of Inequality: Reconsideration of Concepts and Estimation of World Income Inequality” March 2007.

  18. World income distribution, PPP, 1990 and 2003

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

  20. Changes in Gini coefficient

  21. World Income Distribution, 2003

  22. Gini coefficient by region

  23. Income distribution in Asia

  24. Income Inequality in Asia • 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.

  25. Conclusion: 1990 - 2003 • World income inequality decreased very rapidly after 1990s. • 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.

  26. So what? • 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.

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

  28. Per capita income in Asia

  29. Income distribution in Asia

  30. Japanese should work harder? • 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.

  31. Neo-classical view • 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.

  32. Increasing Income Inequality in Japan

  33. Increasing Suicide Rate in Japan

  34. Happiness

  35. Evaluation of Inequality • 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

  36. 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.

  37. Thank you!

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