The slides and references associated with a talk I’m scheduled to give about this subject can be downloaded here. Note if you download the slides prior to 5 June, they may change if I tinker with them.
May 25, 2015
October 6, 2013
Do you think inequality is probably important? But are you also not wholly convinced by the Spirit Level? Are you an empiricist? Are you irritated by your (fellow) left wing friends who now somehow know post Spirit Level that inequality is the most important thing there is? Do you crave evidence? This website is almost certainly going to help.
January 21, 2012
…of research on inequality, and a great dataset, can be found Frederick Solt’s academic webpage.
June 19, 2011
December 5, 2010
August 24, 2010
Ok so I missed Friday but here goes…
Meanwhile, the British Medical Journal has a meta-review of studies of the impact of inequality on health. Summarised conclusion:
The results suggest a modest adverse effect of income inequality on health, although the population impact might be larger if the association is truly causal. The results also support the threshold effect hypothesis, which posits the existence of a threshold of income inequality beyond which adverse impacts on health begin to emerge.
On the subject of inequality, and following from my earlier post on inequality in Latin America, Arthur Ituassu has an interesting article at OpenDemocracy in which he examines the relationship between Brazil’s falling inequality and its rising democracy.
Speaking of democracy, Dani Rodrik a does good job of summarising the economic case for democracy at Project Syndicate.
And at VoxEu John Gibson and David McKenzie examine the economic consequences of migration, in particular the dreaded brain drain. Their conclusion:
Our findings question both the pessimistic view that high-skilled migration hurts development, and the optimistic view that most countries can benefit to the extent Taiwan, China and India have from trade and investment flows. For most countries, the first-order effects are mostly an individual phenomenon – individuals stand to gain a lot from migration, and the second-order effects on others are small in comparison and seem to at least balance one another out if not also be a net positive. In the absence of compelling evidence for massive externalities from their presence, we argue governments should not be so concerned about high rates of skilled emigration, but focus instead on the basics of providing the policy environment needed to foster growth and innovation at home.
On to aid, and a blast from the past in the form of a 1997 Foreign Affairs review by David Rieff of Michael Maran’s book the ‘Road to Hell’. No surprise to discover that people have been launching polemics at aid for a very long time. Rieff’s review is well worth a read both because, depressingly, many of the issues covered remain with us, but also because its evenhanded on the aid industry, criticising where it’s fallen short but also acknowledging the real dilemmas the aid workers face.
On Melanesian Politics, Phil Twyford writes of his time as an election observer in Solomon Islands, and in doing so provides a handy summary of Solomons politics.
And finally, Our Word is Our Weapon, one of the first blogs I encountered writing regularly about aid, is back. Or maybe it never went away and I just had the URL wrong? Still mostly only posting links; interesting links mind you…
August 12, 2010
My certainty on such a claim was shaken by this post at Duncan Green’s blog, which seemed to show the opposite, that Venezuela was doing particularly well at reducing inequality. Green then argued that, say what you might about Chavez, he should be given some credit for his achievements in this area.
Was I wrong?
The first thing I noticed was that Duncan’s post was based on data that spanned from 1990 to 2008. Possibly, I thought, he was giving Chavez credit for inequality which had declined before his time in power. Nevertheless, in penance for my original smearing of the Great Socialist Hope, I decided to devote an afternoon up to my arms in World Bank data to see what was actually going on with inequality in Latin America.
In a moment, I’ll tell you what I found, but first, let’s recap: what’s actually wrong with inequality?
First, everything else being equal, inequality is bad simply because, for any given level of national income, a more unequal country will do a worse job in lifting it’s people out of poverty than a more egalitarian country on the same income level. Of course everything else isn’t equal and a key way that people are lifted out of poverty is through economic growth (growing national income effectively). And it’s always possible that higher inequality might be more conducive to higher growth and, over time this will lead to lower levels of absolute poverty in poorer countries.
However, there’s also some pretty good research to suggest that high levels of inequality actually undermine economic growth. Seminal papers by Engerman and Sokoloff (see here and here) as well as research by William Easterly, point to this being the case. Of course, this doesn’t mean that absolute equality will be optimal for growth or that all attempts to reduce inequality will help growth. However, the evidence does seem to show that high inequality is not good for economic development.
On top of that, there is evidence best summarised by Richard Wilkinson in his book The Impact of Inequality (which is more statistically rigorous, albeit duller, than his other book Spirit Level) to suggest that more unequal societies are beset by all manner of problems including worse crime, lower levels of trust, and worse health outcomes. Wilkinson’s work is most emphatically not beyond critique (as David Runciman points out he’s stretching it a bit to suggest everyone will be worse off in unequal countries; while Claude S Fischer offers excellent critique in the Boston Review). Quite possibly the biggest flaw is that Wilkinson does not, from my recollection, convincingly cover for omitted variables in his analysis – for example: perhaps it’s poor governance that causes countries to both be less trusting and more unequal. Inequality might merely be an effect not a cause. Nevertheless, there remains enough evidence in Wilkinson’s work to at least plausibly suggest that high inequality leads directly to social harm.
Finally, if you’re not a Consequentialist you might also object to high levels of inequality because they seem patently unjust.
To me, the above reasons are, one way or other, good cause to think that reducing inequality (so long as you don’t resort to draconian measures or ransack your economy to do so) is a good thing. So, has anyone being doing this in Latin America?
First, let’s show the obvious: Latin America is a very unequal part of the World (all inequality information in the following charts is in the form of a Gini Index (Gini coefficient * 100)). All numbers come from World Bank data, except those numbers for Sweden, the UK, the USA, and Australia, which come from the CIA World Fact Book; and the figure for New Zealand, which is from New Zealand’s ministry of social development. Please bear in mind that there are other ways of measuring inequality (such as decile ratios) which might return different results, and that my numbers here are only as good as their imperfect source data.
The Latin American countries on the chart are all significantly more unequal than my selection of developed countries (the difference between Colombia and Sweden is staggering!), with the only exception being the USA, which actually (according to the CIA World Fact Book) was more unequal than Venezuela in 2006. However, it’s worth noting that, according to the OECD, the Gini index for the USA is actually 38, not 44. If this is right, then the US remains more equal than Venezuela.
So much for today’s figures, what about trends.
That’s quite a ride for a number of the Latin American Nations. For simplicity’s sake let’s look at more recent years.
A few interesting points to notice: Brazil has seen a steady decrease in inequality since democractisation, with good progress in the Lula years. It’s to early to really tell the impact of Morales in Bolivia and Correra in Equador (although it seems positive for Morales). In general in the countries on this graph at least the current millennium has been one characterised by falling inequality, with the big exception being Columbia.
And as for Chavez, yes, he has presided over a good fall in inequality (the change in trend may have predated him perhaps but he deserves credit). That 2005/2006 change is especially impressive, assuming it’s correct and that it’s not just the result of the wealthy freeing the country. Quite possibly the VoxEU chart that I linked to didn’t have 06 info in it, which might explain Venezuela’s poor performance in it.
Finally, two charts showing change as columns, the first from 1990 (or closest year) to 2006 (or closest year), the second from 2000 (or closest year) to 2006 (or closest year).
To conclude: from the numbers I have, Chavez seems to have done a pretty good job in reducing inequality in Venezuela. I think a lot of what he is doing is very questionable, but in this area at least the results to-date fall in his favour. As, it should be said, do they fall for a number of left-wing reforming regimes in Latin America, such as those in Chile and Brazil over the time studied.