Does Globalization Reduce Global Inequality? A Reassessment Based on Disaggregating "Chindia" into Smaller Spatial Units.

Studies repeatedly found that under globalization in the last two decades, average within-country income inequality in the world increased, whereas population-weighted between-country inequality of income based on purchasing-power-parity (PPP) decreased. On the other hand, it is debatable whether overall global income inequality, which takes into account both within-country and between-country inequalities, is increasing or decreasing. Since decreasing between-country inequality and increasing average within-country inequality are largely attributable, respectively, to the rapid growth of average income and income inequality in China and India, or "Chindia," one may wonder whether their within-country inequality growth simply neutralized their contribution to between-country inequality reduction to generate rising overall global inequality. To answer this question under the understanding that Chindia's internal inequality is mostly expressed in inter-regional and rural-urban inequality, we disaggregate the countries into the smallest subnational units possible, and treat them as individual countries in measuring population-weighted between-country inequality as an approximation of global income inequality. Using the most updated PPP measurements of countries' income released by the World Bank in 2008, we find that despite the downward adjustment of Chindia's average income growth according to the new PPP measurements, and despite the rapid growth of Chindia's within-country inequality and elsewhere, overall global inequality significantly decreased in 1980-2005. But we also foresee that all other things being equal, global inequality could increase in the next 25 years when the maturation of Chindia's economies cause growth rates there to diminish. ..PAT.-Unpublished Manuscript [ABSTRACT FROM AUTHOR]