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Inequality Convergence

Title: Inequality Convergence
Author: Martin Ravallion
Pub. Date: January 23, 2002
Full Text: PDF (150 KB)

Is income inequality tending to fall in countries with high inequality and to rise in those where inequality is low? Is there a process of convergence toward medium-level inequality?

Comparing changes in inequality with initial levels, using new data, Ravallion finds that within-country inequality in income or per capita consumption is converging toward medium levels—a Gini index around 40 percent. The finding is robust to allow for serially independent measurement error in inequality data and for short-run dynamics around longer-term trends.

However, the convergence process is neither rapid nor certain, and more observations over time are needed to be confident of the pattern. Ravallion offers an approach to modeling the determinants of inequality that may be a starting point for estimating richer models.

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