Unit 9 Uneven development on a global scale
9.11 Catch-up growth: A less unequal world
The previous two sections describe a number of examples of individual countries that achieved significant catch-up growth. How has rapid growth in poorer countries affected income inequality across the world?
Global living standards have risen; global inequality has fallen
So far, we have focused attention on how average living standards have changed across countries, although the ‘skyscraper’ charts in Figure 9.2 also illustrate what has happened to inequality within countries. We now take a different perspective and consider the income distribution for all the citizens of the world from the poorest to the richest, irrespective of which country they live in. This data is presented in Figure 9.26.
Note that since global GDP per capita is a simple average, it measures the income everyone in the world would receive if all income inequality within countries were entirely eliminated. In contrast to the figures at different percentiles, which take into account incomes that are actually received, GDP per capita is a hypothetical calculation.
Arranging the data like this means that for each year, we can ask how the income of the person at the 90th percentile of the distribution of incomes across the globe (that is, with 10% of people richer than them) compares with the income of the person at the 50th (the median, that is, with 50% of people richer than them) or the person at the 10th percentile. We can compare incomes at these percentiles with that of mean income each year. Mean income and the income of the person in the world at each percentile are estimates of incomes measured at purchasing power parity (PPP) so as to be comparable irrespective of where the person lives.
Figure 9.26 presents these estimates for each year from 1950 to 2022 using the ratio scale. It shows that the past seven decades have experienced significant growth at all points in the global income distribution. Average incomes have risen (the red line) but the key feature this chart brings out is that, on a sustained basis, growth has been more rapid at the bottom end of the income distribution than at the top (the bottom two lines are steeper than the top two lines). The median income comes closer to the mean, and closer to incomes at higher percentiles, especially from 1980 onwards—this is shown in the contrast between the flattening of the curves for top incomes from 1980 compared with continued growth at the median and below.
| 1950 | 2022 | |
|---|---|---|
| 90/10 ratio | 72 | 32 |
| 80/20 ratio | 23 | 10 |
Figure 9.26 The global distribution of income, 1950–2022 (ratio scale), and the ratio of income at the 90th percentile to the 10th and at the 80th to the 20th.
UNU-WIDER, World Income Inequality Database (WIID). Version 29 April 2025.
Note that by focusing on ratios at different percentiles, the table in Figure 9.26 focuses on relative inequality. Alternative measures focus on absolute inequality, that is, on the differences between incomes at different percentiles, measured in dollars at PPP. On this basis, inequality was increasing more or less continuously—meaning that if we drew Figure 9.26 on a linear scale, rather than a ratio scale, the gaps between the percentiles would be steadily increasing. For a discussion of the contrast between these approaches, and for a description of the data construction process, read Carlos Gradín’s ‘Revisiting the Trends in Global Inequality’.
The table in Figure 9.26 shows how much global inequality fell over this period, according to two summary measures. In 1950, taking the world as a whole, the income of the person 10% from the top was 72 times as high as the person 10% from the bottom. By 2022, the 90/10 ratio had fallen to 32 times as high; similarly, the 80/20 ratio fell from 23 to 10. Although the world remains a very unequal place, the disparities between rich and poor have fallen significantly: both ratios have roughly halved. According to this measure, global inequality has been falling steadily.
This might seem surprising. In many countries, inequality within the country has increased, as discussed in earlier units. But at the same time, the process of catch-up growth in many of the poorer countries of the world has significantly reduced inequality between countries. In the world as a whole, the impact of falling ‘between-country’ inequality has more than offset the impact of growing ‘within-country’ inequality. For the period since 1980, the animated ‘skyscraper’ figure captures both of these dimensions showing the transformation of the within-country inequality (the rising height of the skyscrapers at the back) and the between-country inequality as the large, once very poor countries of China, and later India, jumped up the global distribution of income, pulling vast numbers of people out of extreme poverty.
Exercise 9.13 Between-country inequality
The table below shows incomes in two countries, one low-income (Country P) and one high-income (Country R). Assume both countries have the same population as each other, and in each time period. Use this information to answer the following questions.
| 50 years ago | Now | |||
|---|---|---|---|---|
| Country P | Country R | Country P | Country R | |
| Bottom 10% | 1,450 | 9,000 | 11,000 | 11,000 |
| Median | 1,450 | 29,000 | 11,000 | 37,000 |
| Top 10% | 140,000 | 140,000 | 320,000 | 320,000 |
- Compare income inequality (top 10% vs bottom 10%) in both countries (50 years ago vs now).
- Explain how global inequality (according to the ratio measure in Question 1) has changed over the two time periods.
- Now assume that the output produced in Country P displaces some output previously produced in Country R, which lowers the income ‘Now’ of the bottom 10% and the median in the rich country by 20% (compared to the numbers shown in the table). How does this change your answer to Questions 1 and 2? Clearly state any assumptions you make.
In the late eighteenth century, Thomas Malthus had claimed that sustained increases in income were impossible. Although he was proved wrong, his argument (explained in Sections 1.6 and 1.7 of the microeconomics volume) provides insight into why countries stayed on the flat part of the hockey stick for so long.
The process of convergence of global incomes shown in Figure 9.26 is all the more remarkable because this unwinds the previous 150 years of divergence. During the nineteenth century a relatively small number of countries moved up the hockey stick and escaped from Malthusian stagnation. For the majority of the world’s population, nothing much changed. Economists refer to this period as the ‘Great Divergence’. This is illustrated starkly in Figure 9.27, which begins in 1800.
In Figure 9.27, we abstract from within-country inequality and focus attention on country-level differences in average income. For each year, the global mean income (which is the simple arithmetic average of per capita income in each country) is shown in red. Estimates of the average income in the countries in the bottom 20% of the global income distribution and those in the top 20% are also shown. These are calculated for each year by ordering countries according to their average per capita income, creating a global distribution of income with each person treated as if they received the average income for their country.
Read Sections 1.11 and 2.9 of the microeconomics volume for a discussion of the role of European colonization.
For roughly 150 years, there was typically fairly steady growth of the average shown in red, interrupted only briefly by the Great Depression and two world wars. More is revealed by comparing the bottom and top 20%, where the series first diverge and then converge. Upon closer analysis, until around 1950, the growth of the average was essentially driven entirely by growth of the income of the top 20% of the global population: to a very good approximation, the poorest 20% experienced no growth in living standards at all.
Figure 9.27 The global ‘between-country’ distribution of incomes, 1800–2020.
UNU-WIDER, World Income Inequality Database (WIID). Version 29 April 2025. https://doi.org/10.35188/UNU-WIDER/WIID-290425; Gapminder. 2025.
In Figure 9.27, the pattern of growth of the bottom 20% since 1950 is more variable than the path for the 10th and 20th percentiles in Figure 9.26, because at points there are significant shifts when countries with large populations—most notably China—have moved in or out of the bottom 20% of incomes.
From roughly 1950 onwards, there were two significant changes. First, the growth rate of the global mean picked up. But most crucially, for the first time, the bottom 20% of the global population actually saw the benefits of this growth, as Figure 9.26 has already shown.
But much of the world is still poor, so future growth matters
While Figures 9.26 and 9.27 paint a somewhat optimistic picture in terms of growth rates, it is also worth considering the absolute levels of incomes at each percentile.
The latest available figure for median global per capita income shown in Figure 9.26, for 2022, was $9,758 expressed in terms of 2017 US prices (roughly $12,500 in 2025, if we correct for US inflation since 2017). So half the world’s population had an income less than this amount. In Singapore, only 1% of the population had incomes as low as this (measured at PPP).
The median global income in 2022 was only around 18% of the median income in the United States; and only 9% of the median income in high-income, but much less unequal, Singapore. The median global income in 2022 corresponds to an income in roughly the bottom 2.5% of the income distribution of the United States. So half the world’s population in 2022 was surviving on an income that would provide a standard of living less than or equal to that of the very poorest households in the United States.
The comparisons with the United States and Singapore are, of necessity, fairly imprecise. The WIID dataset also calculates implied percentiles of GDP per capita for individual countries. With all income measured at constant 2017 PPP prices, the median global income of $9,758 can be directly compared with the 2nd and 3rd percentiles of the US income distribution ($8,930 and $10,809 respectively), and the bottom percentile of the Singaporean distribution ($9,722).
And you need to bear in mind that this ‘less than’ encompasses a very wide range of incomes within the bottom half of the world’s population. For example, the data in Figure 9.26 shows that in 2022, someone at the 10th percentile of global incomes had an income less than one-sixth of the global median. Income levels as low as this would be completely off the bottom of the scale in the income distribution of a high-income country. And of course, this also tells us that 10% of the world’s population are even poorer than that.
Figure 1.3 of the microeconomics volume shows that the share of the world’s population living in extreme poverty fell from 76% in 1820 to 10% in 2018.
The key messages of Figures 9.26 and 9.27 are therefore: first (the good news) that there has been a significant escape from dire poverty, and a reduction of global inequality in recent decades. Second (the less-good news), much of the world remains poor. Even if the rate of convergence of global incomes that we have experienced in recent decades were to continue, it would take multiple decades for incomes of the global poor to catch up even with the current level of incomes in rich countries. Doing Exercise 9.14 will enable you to calculate how many decades it would take for incomes of the global poor to catch up even with the current level of incomes in rich countries.
Exercise 9.14 Growth rates and the rule of 70
The median global income in 2022 was only around 18% of the median income in the United States and only 9% of the median income in Singapore.
- If the growth rate of global median income is 2.6% per year, calculate (using the rule of 70) approximately how many years it would take to catch up with the current median income of (i) the United States, and (ii) Singapore.
- Show how your answer to Question 1 would change if the growth rate of global median income was equal to that of China’s average growth rate from 1990 to 2020 (use the World Bank Group’s data to help you calculate this average.)
