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W3 Branko Mila Global Income Inequality by the Numbers.docx

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University of British Columbia
ECON 255
Ashok Kotwal

W3: Global Income Inequality by the Numbers by Branko Milanovic − Poverty is usually measured at a national scale. However, 2 reasons make the study of poverty at a global level relevant: 1. Production across borders 2. Movement of capital, goods, technology and ideas across borders  this liberalization encourages more communication/global networking especially with those you don’t know and dependence on other nations  since globalization allows knowledge to be transferred at instant, individuals begin to know how others do in terms of income  this is the reason for global inequality to become so important [3 Concepts of Inequality and How They Evolved over the Past Sixty Years] − Inequality 1:  Inequality between nations  Method of calculation: 1) by comparing GDPs or 2) mean incomes obtained by household survey of all countries around the world without population weighting  Income calculation is not based on individual incomes but it is based on individual national average  use GINI coefficient − Inequality 2:  Same calculation as Inequality 1 but it takes into consideration the population factor  Also, income calculation is based on national average − Inequality 3  Considers individual income across nations  comparison is not made by nations against nation; it is done by individuals against individuals globally  not all British has the income of average national British income  But this method will need to access every household which is difficult to do  household survey only started in the 1980s for some countries  so any data before that period is based on approximation  Calculation: individuals’ income of a nation will be measured against the price level of the particular country since price level varies in different countries  Currency used: the Purchasing Power Parity (PPP)  the idea where one can buy the same amount of good in any part of the world and use real dollar − Figure: The Mother of All Inequality Disputes − The Disputes:  Trend for
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