Globalization, Poverty, and Inequality Since 1980
2004
Dollar, David
One of the most contentious issues of globalization is the effect of global economic integration on inequality and poverty. This paper documents five trends in the modern era of globalization, starting around 1980. Trend #1: Poor country growth rates have accelerated and are higher than rich country growth rates - for the first time in modern history. The developing world economy grew at more than 3.5 percent per capita in the 1990s. Trend #2: The number of poor people in the world has declined significantly - by 375 million people since 1981 -- the first such decline in history. The share of the developing world population living on less than $1 per day was cut in half since 1981. Trend #3: Global inequality (among citizens of the world) has declined - modestly -- reversing a 200-year-old trend toward higher inequality. Trend #4: There is no general trend toward higher inequality within countries. Trend #5: Wage inequality is rising worldwide (which may seem to contradict trend #4, but it does not because wages are a small part of household income in developing countries, which make up the bulk of the world in terms of countries and population). Furthermore, the trends toward faster growth and poverty reduction are strongest in the developing countries in which there has been the most rapid integration with the global economy, supporting the view that integration has been a positive force for improving peoples lives in the developing world.
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