Decomposing world income distribution

Using national income and expenditure distribution data from 119 countries, this paper decomposes total income inequality between the individuals in the world, by continent and by "region" (countries grouped by income level). It uses a Gini decomposition that allows for an exact breakdown (without a residual term) of the overall Gini by recipients.

Argues that looking first at inequality in income between countries is more important than inequality within countries. Africa, Latin America, and Western Europe and North America are quite homogeneous continents, with small differences between countries (so that most of the inequality on these continents is explained by inequality within countries).

The authors divide the world into three groups: the rich G7 countries (and those with similar income by income level; the less developed countries (those with per capita income less than or equal to Brazil's); and the middle-income countries (those with per capita income between Brazil's and Italy's). They find little overlap between such groups: very few people in developing countries have incomes in the range of those in the rich countries.