NCPA - National Center for Policy Analysis

World Poverty Rate Falls

June 11, 2002

The portion of the world's population living below the poverty line has fallen dramatically in the last three decades and overall inequality has decreased as well. So concludes Columbia University economist Xavier Sala-i-Martin in a recent analysis.

One way economists measure inequality is by the Gini coefficient -- which consists of a zero-to-one scale on which zero means each person in the world has the same income and one means that a single individuals collects the world's entire income.

  • The economist estimates the world's Gini coefficient fell to 0.63 in 1998 from 0.66 in 1970.
  • He also finds that the fraction of the world's population below the poverty line fell from 41 percent in 1970 to 19 percent in 1998.
  • The poverty line is defined as $2 a day in constant 1985 dollars.

Most of the reduction in poverty is due to rising incomes in China and India since 1980.

But poverty has worsened in Africa. And while Latin American poverty rates decreased in the 1970s, they've changed little since then.

Source: Peter Coy, "Economic Trends: Poverty: The News Brightens," Business Week, June 17, 2002; Xavier Sala-i-Martin, " The World Distribution of Income (estimated from Individual Country Distributions)," NBER Working Paper No. w8933, May 2002, National Bureau of Economic Analysis.

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