Where in the world are you? Assessing the importance of circumstance and effort in a world of different mean country incomes and (almost) no migration

Milanovic, Branko (2007): Where in the world are you? Assessing the importance of circumstance and effort in a world of different mean country incomes and (almost) no migration. Unpublished.

Abstract

Suppose that all people in the world are allocated only two characteristics: country where they live and social class within that country. Assume further that there is no migration. We show that 90 percent of variability in people’s global income position (percentile in world income distribution) is explained by only these two pieces of information. Mean country income (circumstance) explains 60 percent, and social class (both circumstance and effort) 30 percent of global income position. But as at least 1/3 of the latter number is due to circumstance as well, the overall part of circumstance is unlikely to be under 70 percent. On average, “drawing” one-notch higher social class (on a twenty-class scale) is equivalent to living in a twelve-percent richer country. Once people are allocated their social class, it becomes important, not only whether the country they are allocated to is rich or poor, but whether it is egalitarian or not. This is particularly important for the people who “draw” low or high social classes; for the middle classes, income distribution is much less important than mean country income.

• Item Type: MPRA Paper
• Institution: World Bank
• Language: English
• Keywords: Global inequality; income distribution; migration
• Subjects: D - Microeconomics > D3 - Distribution > D31 - Personal Income, Wealth, and Their Distributions

References

Berry Albert and John Serieux (2097), “World economic growth and income distribution, 1980-2000” in Flat World, Big Gaps (2007), edited by K.S. Jomo and Jacques Baudot, Hyderabad, India, London; UK and New York, US; Penang, Malaysia: Orient Longman, Zed Press and Third World Network, pp. 1-23. Blanden, Joe, Paul Gregg and Stephen Machin (2005), “International mobility in Europe and North America”, Centre for Economic Performance, London, April. Borjas George J. (1987), “Self-selection and the earnings of immigrants”, American Economic Review, vol. 77, pp. 531-553.

Borjas, G. J. (1999). “The economic analysis of immigration”, in O. Ashenfelter and D. Card (Eds.), Handbook of Labor Economics, vol. 3A, Chapter 28, pp. 1697-1760. Elsevier Science North Holland.

Bustillo, Rafael Munoz de (2007), “Migration and inequality: What do we know?”, Provisional draft, May 2007. Bourguignon, Francois and Christian Morrisson (2002), “The size distribution of income among world citizens, 1820-1990”, American Economic Review, September, pp. 727-744. Bjorklund, Anders and Markus Jantti (1997), “Intergenerational income mobility in Sweden compared to the United States”, American Economic Review, vol. 87, No. 5, pp. 1009-1018. Checcci, D., A. Ichino and A. Rustichini (1999), “More equal but less mobile? Education financing and intergenerational mobility in Italy and in the US”, Journal of Public Economics, vol. 74, No. 3, pp. 351-394. Davies, James B., Jie Zhang and Jinli Zeng (2005), “Intergenerational mobility under private vs. public education”, Scandinavian Journal of Economics, vol. 107, No. 3, pp. 399-417. Jackson, Ben and Paul Segal (2004), “Why inequality matters”, A Catalyst working paper, Catalyst: London, UK. Kopczuk, Wojciech, Joel Slemrod and Shlomo Yitzhaki (2005), “The limitations of decentralized world redistribution: An optimal taxation approach”, European Economic Review, vol. 29, pp. 1051-1079. Lam, David and Robert Schoeni (1993), “Effects of family background on earnings and returns to schooling: Evidence from Brazil”, Journal of Political Economy, vol. 110, pp. 710-740. Li, H., L. Squire and Heng-fou. Zou (1998), “Explaining international and intertemporal variations in income inequality,” The Economic Journal, 108, 26-43. Milanovic, Branko (2002), “True world income distribution, 1988 and 1993: First calculations based on household surveys alone”, Economic Journal, vol. 112, No. 476, January, pp. 51-92. Milanovic, Branko (2005), Worlds Apart: Global and International Inequality 1950-2000, Princeton University Press. Milanovic, Branko (2006), “Ethical and economic case for global transfers”, mimeo, October, forthcoming in Ethics and International Affairs. Nagel, Thomas (2005), “The problem of global justice”, Philosophy and Public Affairs, vol. 35, No. 2, pp. 113-147. Palma, Jose Gabriel (2006), “Globalizing inequality: “centrifugal” and “centripetal” forces at work”, United Nations DESA Working paper No. 35, September 2006. Pogge, Thomas (1994), “An Egalitarian Law of Peoples”, Philosophy and Public Affairs, vol. 23, No. 3 (Summer), pp. 195-224.

Rawls, John (1971), A theory of justice, Cambridge, Mass.: Harvard University Press. Revised edition published in 1999.

Rawls, John (1999), The law of peoples, Cambridge, Mass.: Harvard University Press.

Roemer, John E. (1998), Equality of opportunity, Harvard University Press.

Roemer, John E. (2007), “What portion of global income inequality is due to country of residence”, mimeo. February 5,. 2007.

Solon, G, (1999), “Intergenerational mobility in the labor market”, in O. Ashenfelter and D. Card (eds.), Industrial concentration and economic inequality: Essays in honor of Peter Hart, Edward Elgar, Aldershot, pp. 3-21. Sutcliffe, Bob (2003), “World Inequality and Globalization”, Oxford Review of Economic Policy, vol. 20, No. 1, pp. 15-37.