Inequality between Countries Seems to be Here to Stay

3 april 2018

There is a lot of diversity in the modern world when it comes to the level of development. The existing statistics allow for comparisons to be made between the GDP of 175 countries in 1992–2016, Analytical Center experts note in their new bulletin on the current trends in the modern economy titled Uneven Economic Development around the World.

The bulletin puts all countries into seven groups according to their level of development. According to analysts, to do that the World Bank Data on purchasing power parity GDP with 2011 are used as the base year. This approach was developed to get comparable data on per capita GDP in different countries of the world by eliminating the impact of currency exchange variations. The analysts say that the conclusions most relevant for the analysis of the overall prosperity around the world are quite simple: in the 24-year period they looked at the average global per capita GDP at purchasing power parity increased from USD 8,900 in 1992 to USD 15,100 in 2016.

The experts note that the period they reviewed saw a significant increase in per capita GDP at PPP in the middle of the distribution (primarily in China), with poverty declining sharply in India. On the other hand, the 1992–2016 period saw an increase in the gap not only between the rich and poor countries from USD 42,000 per person to USD 57,000 per person, i.e. between the first most developed group of countries and the seventh poorest group, but also between all the seven groups.

Nevertheless, the problem of poverty was never tackled once and for all and the different clusters of countries never actually moved closer to each other in absolute terms, the specialists noted. Financial and business crises, the medium development level trap, oil and forex shocks are creating serious obstacles on the way towards evening out the development levels in different countries.

"In this context we ignore the problem of social inequality within the countries. However, it should be mentioned here that as the economy grows some social groups become more affluent faster than others, often with little correlation to the average economic growth of the country as a whole. Thus, the most affluent social groups tend to gain the largest share of the overall household income and economic growth hardly affects that share," the experts write in the bulletin. This often results in a situation where social inequality within the poorest countries in the sixth and seventh clusters either remains the same or even gets worse, meaning that poverty in absolute terms never goes away, the specialists are convinced. Within countries inequality also seems to be quite persistent.

For more see the bulletin Uneven Economic Development around the World.

Other bulletins on current global economic trends can be found in Publications.