International Comparisons of Inequality of Incomes

In this article we will discuss about the International Comparisons of Inequality of Incomes.

It would be quite important to look at international comparison of inequality of incomes. The World Bank and the Institute of Development Studies at Sussex University (England) jointly conducted a study on the inequality of incomes.

Accordingly, the extent of inequality was classified in three categories:

(i) High inequality,

(ii) Moderate inequality and

(iii) Low inequality.

In order to analyse relative inequality, this study examined the income shares of the lowest 40 per cent, the middle 40 per cent and top 20 per cent of the households.

Accordingly, the degree of inequality was measured on the basis of the share of the lowest 40 per cent of the population as follows:

Share of lowest 40 per cent of population in national income is as given below:

(a) High inequality: less than 12 per cent

(b) Moderate inequality: Between 12 and 17 per cent and

(c) Low inequality: 17 per cent and above.

In this joint study, the income patterns of 66 countries were studied and accordingly the following broad patterns were simply identified.

“The socialist countries have the highest degree of overall equality in the distribution of income. This is, we would expect, since income from the ownership of capital does not accrue as income to individuals. The observed inequality in these countries is due mainly to inequality in wages between sectors and skilled classes. Since the structural factors operating towards equality are the strongest in these countries, the average income share of the lowest 40 per cent in amounting to above 25 per cent of total income may be taken as an upper limit for the larger income share to which policy-makers in underdeveloped countries can aspire.”

“The developed countries are evenly distributed between the categories of low and moderate inequality. The average income share of the bottom 40 per cent amounts to about 16 per cent which is lower than the average for socialist countries but better than most of the under-developed countries. Most of the under­developed countries show markedly greater relative inequality range with another third displaying moderate inequality—those of the underdeveloped countries classified in the low inequality category have income share for the lowest 40 per cent average 18 per cent as is the case with the most egalitarian of the developed countries. Against this, however, half the underdeveloped countries show income shares of the lowest 40 per cent averaging only 9 per cent.”

Table 3.6 (a) shows the extent of income inequalities among different selected countries of the world.

Table 3.6(a) reveals that income inequalities among the selected countries were very high in Brazil and Mexico. Such inequalities were quite moderate in USA, UK and China, but such inequalities were low in countries like Pakistan, India, Sri Lanka and Switzerland.