Convergence in income distributions: Evidence from a panel of countries

• Published in: Economic modelling 2016-12, Vol.59, p.262-270
• Main Authors: Chambers, Dustin, Dhongde, Shatakshee
• Format: Article
• Language: English
• Subjects: Beta convergence; Cross-country; Economic development; Gini index; Globalization; Income distribution; Indexes; Inequality; Panel; Studies; Sustainable development
• ISSN: 0264-9993; 1873-6122
• DOI: 10.1016/j.econmod.2016.07.019

There is growing evidence that countries' income distributions have changed significantly since globalization accelerated in the early 1990s. Using a large panel of Gini indices covering 81 countries between 1990 and 2010, we find strong evidence that inequality declined in nations that were initially highly unequal, while inequality increased in nations with initially low inequality. This pattern holds for both developed and developing countries, but developed countries' relative income distributions have converged at a more rapid pace. These findings are robust to the method of estimation, level of economic development, time horizon, data source or measure of inequality. Our results suggest that income distributions in countries are becoming increasingly unequal yet more similar to each other. Consequently, countries are beginning to coordinate their strategies to jointly reduce inequality through initiatives such as the United Nations' Sustainable Development Goals. •Test convergence in income distributions across 81 nations between 1990 and 2010•Estimate cross-section and panel regression models using data on Gini indices and Mean log deviation of income•Inequality declined in nations that were initially highly unequal and increased in nations with initially low inequality•Compared developing nations, the speed of convergence was faster among developed nations•Countries need to coordinate strategies to jointly reduce inequality and promote more inclusive economic growth