This entry presents the evidence on global economic inequality. It considers economic history and how global inequality has changed and is predicted to continue changing in the future.
A related entry on Our World in Data presents the empirical evidence of how income inequality has changed over time, and how the levels of inequality in different countries can vary significantly. It also presents some of the research on the factors driving the inequality of incomes.
The chart below shows the distribution of annual income among all world citizens. To make incomes comparable across countries and time, daily incomes are measured in international-$ — a hypothetical currency that would buy a comparable amount of goods and services that a U.S. dollar would buy in the United States in 2011 (for a more detailed explanation, see here).
The distribution of incomes is shown at 3 points in time:
- In 1800, few countries had achieved economic growth. The chart shows that the majority of the world lived in poverty with an income similar to the poorest countries today. Our entry on global extreme poverty shows that at the beginning of the 19th century the huge majority—more than 80%—of the world lived in material conditions that we would refer to as extreme poverty today.
- In the year 1975, 175 years later, the world had changed—it had become very unequal. The world income distribution was bimodal, with the two-humped shape of a camel. One hump below the international poverty line and a second hump at considerably higher incomes—the world had divided into a poor, developing world and a developed world that was more than 10-times richer.
- Over the following 4 decades the world income distribution has again changed dramatically. The poorer countries, especially in South-East Asia, have caught up. The two-humped “camel shape” has changed into a one-humped “dromedar shape”. And the distribution has also shifted to the right—the incomes of many of the world’s poorest citizens have increased and poverty has fallen faster than ever before in human history.
Global inequality in 1800, 1975, and 20152
The visualization below shows the distribution of incomes between 1988 and 2011. The data was compiled by the economists Branko Milanovic and Christoph Lakner.3 To see the change over time, select the years just above the distribution.
The previous visualization, which showed the the change from 1820 to the year 2000 is based on estimates of inflation-adjusted average incomes per country (GDP per capita) and a measure of income inequality within a country only. It gives us a rough idea of how the distribution of incomes changed, but it is not very detailed and not very precise. In contrast to this, the work by Branko Milanovic and Christoph Lakner is based on much more detailed household survey data. This data measures household income at each decile of the income distribution and the two authors used this information to arrive at the global income distribution. The downside of this approach is that we can only go as far back in time as household surveys were conducted.
The visualization shows the end of the long era in human history in which global inequality was increasing. Starting with industrialization in North-Western Europe, incomes in this part of the world started to increase while material prosperity in the rest of the world remained low. While some countries followed the European industrialization – first Northern America, Oceania, and parts of South America and later Japan and East Asia – other countries in Asia and Africa remained poor. As a consequence of this, global inequality increased over a long period of time. Only in the period shown in the visualization below did this change: With rapid growth in much of Asia in particular, the global distribution of incomes became less unequal. The incomes of the poorer half of the world population rose faster than the incomes of the richer half of the world population.
Global Income Distribution 1988 to 20114
If you want to use this visualisation for a presentation or for teaching purposes etc. you can download a zip folder with an image file for every year and an animated .gif here.
The visualization below shows how the global income distribution has changed over the decade up to 2013. Tomáš Hellebrandt and Paolo Mauro, the authors of the paper5 from which this data is taken, confirm the finding that global inequality has declined: the Gini coefficient of global inequality has declined from 68.7 to 64.9.
The visualisations above show the income distribution on a logarithmic x-axis. This chart in contrast plots incomes on a linear x-axis and thereby emphasizes how very high global inequality still is: The bulk of the world population lives on very low incomes and the income distribution stretches out very far to the higher incomes at the right-hand side of the chart; and incomes over 14,000 international-$ are cut off as they would make this chart with a linear x-axis unreadable.
A second striking and very positive global development shown in this chart is the rise of the global median income. In 2003 half of the world population lived on less than 1,090 international-$ per year and the other half lived on more than 1,090 international-$. This level of global median income has almost doubled over the last decade and was 2,010 international-$ in 2013.
Finally, the authors also dare to make a projection of what global inequality will look like in 2035. Assuming the growth rates shown in the insert in the top-right corner, the authors project global inequality to decline further and to reach a Gini of 61.3. At the same time the incomes of the world’s poorer half would continue to increase strongly so that the global median income could again double and reach 4,000 international-$ in 2035.
The global income distribution in 2003, 2013, and the projection for 20356
If you are looking for a visualisation of only the observed global income distribution in 2003 and 2013 you find it here.
The following visualisation offers an alternative view on the data by Hellebrandt and Mauro7 shown in the chart before.
The chart shows the yearly disposable income for all world citizens in both 2003 and 2013. On the x-axis you see the position of an individual in the global distribution of incomes and on the logarithmic y-axis you see the annual disposable income at that position.
The increase in prosperity—and decrease of poverty—is substantial. The income cut-off of the poorest 10% has increased from 260 international-$ to 480 international-% and the median income has almost doubled from 1,100 international-$ to 2,010. Global mean income in 2013 is 5,375 international-$.8
The global income distribution in 2003 and 20139
The visualization below presents the same data in the same way, except that the y-axis is now not logarithmic but linear. This perspective shows the still very high level of global inequality even more clearly.
The previous and the following visualisation show how very high global income inequality still is: The cut-off to the richest 10% of the world in 2013 was 14,500 int-$; the cut-off for the poorest 10% was 480 int-$. The ratio is 30.2.
While global inequality is still very high, we are now living in a period of falling inequality: In 2003 this ratio was 37.6. The Gini coefficient has also fallen from 68.7 to 64.9.
Taking the historical experience as a guide for what is possible in the future we have to conclude that global inequality will remain high for a long time. To understand this, we can ask how long it would take for those with incomes at the poorest 10% cutoff to achieve the current incomes of the richest 10% cutoff (which is 14,500 international-$). This income level is roughly the level of GDP per capita above which the poverty headcount gets close to 0% for most countries (see here).
How long does it take for incomes to grow from 480 int-$ to 14,500 int-$?
|2% growth||172.1 years|
|4% growth||86.9 years|
|6% growth||58.5 years|
|8% growth||44.3 years|
|10% growth||35.8 years|
Even under a very optimistic scenario it will take several decades for the poor to reach the income level of the global top 10%.
2% is roughly the growth rate that the richest countries of today experienced over the last decades (see here). We have seen that poorer countries can achieve faster growth, but we have not seen growth rates of more than 6% over a time frame as long as necessary to reach the level of the global 10% in such a short time. If the past is a good guide for the future, the world will very likely be highly unequal for a long time.
The global income distribution in 2003 and 201310
Global inequality is driven by changes both of the inequality within countries and the inequality between countries. The below visualization shows how both of these changes determine the changing global inequality.
– Inequality within countries followed a U-shape pattern over the course of the 20th century.
– Inequality between countries increased over the course of 2 centuries and reached its peak level in the 1980s according to the data from Bourguignon and Morrison shown here. Since then, inequality between countries has declined.
As is shown in the visualization below, the inequality of incomes between different countries is much higher than the inequality within countries. The consequence of this is that the trend of global inequality is very much driven by what is happening to the inequality between countries.
Global inequality between world citizens and its components 1820-199211
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Shares of world GDP (% of world total), 1700-203012
The world’s shifting economic center of gravity, 1 CE – 2025 CE – Oxford Martin School (2013)13
Wikipedia’s list of estimates of real gross domestic product growth rate for the latest available year is here.
Global inequality is extremely high and on many of the previous charts incomes are plotted on a logarithmic axis. Here you see the change on a linear axis.
Growth convergence vs absolute income convergence, 1990-2003 – Todaro & Smith (2011)14
The already mentioned study by Sudhir Anand and Paul Segal is a very good review of this topic.15
Total and between inequality: comparisons of different studies – Liberati (2013)16
- Data: Various economic and social indicators, including income inequality
- Geographical coverage: Global
- Time span: Depends on indicator being used
- Available at: Online here