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Global Inequality

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Title: Global Inequality


1
Global Inequality
  • Jan Luiten van Zanden
  • UU/Groningen/Stellenbosch

2
Three issues
  • Global Inquality long-term trends in world
    economy 1500-2010 the GDP evidence
  • Beyond GDP OECD report
  • Why theories and speculations

3
The questions
  • Why are some countries rich and others poor?
  • Why are some countries less unequal than others?
  • Are we measuring economic performance correctly?

4
Recent trends in research
  • Trying to get the big picture, and searching
    for the deep roots of development and
    underdevelopment (Engermann Sokoloff, Acemoglu
    et.al., Nunn)
  • New research on non-western world China, Japan,
    India (Great Divergence debate)
  • The problem of Africa

5
Recent trends in research
  • From research focused on nation state to
    international-comparative and global research
  • Need for large global datasets, example Maddison
    estimates of GDP and population
  • To answer questions about when (did global
    inequality begin to increase?) and why?

6
What we need
  • Better estimates of the usual indicators (such
    as GDP)
  • Alternative indicators real wages, life
    expectancy, biological standard of living,
    agency (Sen)
  • Datasets about proximate and ultimate causes of
    growth and stagnation human capital,
    institutions, family systems, culture and
    religion, knowledge production (books?),
    geography etc.
  • How does growth affect sustainability?
  • For the period 1500-2010, for the whole world

7
Approach CLIO INFRA
  • Set of specialized hubs that produce global
    datasets
  • Central website at International Institute for
    Social History (IISH)
  • Cooperation with Gapminder and Statplanet
  • And with Data Archive DANS for datastorage

8
CLIO INFRA
  • Total budget 4.2 M
  • For 2011-2014
  • Stages 2011 design central hub, and
    requirements of data uploaded from datahubs
  • June 2012 first version on-line available first
    sets of data from hubs
  • 2012/2013 work on datasets and on refinements
    central hub
  • 2014 final version of all websites

9
CLIO INFRA consists of
  • Thematic datahubs
  • National Accounts the Maddison project
    (Groningen)
  • Biological Standard of Living and Age heaping
    (Tuebingen)
  • Human Capital Formation (Debrecen/Utrecht)
  • Demography, Gender, Labour Status (IISH)
  • Prices and Wages (IISH)
  • Institutions Agency (UU)
  • Sustainability (UU)

10
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11
CLIO INFRA-OECD cooperation
  • OECD
  • Maddison strong links with OECD (Development
    Center)
  • Resulting in major publications (The World
    Economy 2006)
  • Continuation of this kind of historical work?
  • OECD Better Life initiative on well-being
    indicators multidimensional measures of
    development

12
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13
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14
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15
Industrial Revolution
Black Death
1086
16
Golden Age
Black Death
French Occupation
17
Stable growth between 1348 and 1800
18
Sung peak
19
Peak Arab World
Ottoman Empire
20
Results
  • Charting long-term trajectories of various parts
    of world economy 1000-2000
  • Also Middle East/Ottoman Empire, India, Japan
  • Transition from Malthusian economy to modern
    growth in North Sea area in two steps Late
    Middle Ages (Black Death), ca. 1800 (Industrial
    Revolution)
  • Rest of the world gradual spread of Industrial
    Revolution
  • Combination with dataset of income inequality
    within countries global inequality

21
The aim various dimensions of inequalityGlobal
Income Inequality 1820-2000
GDP per capita
22
World income inequality
23
Within-country income inequality
24
GDP and Beyond
  • OECD Better Life Initiative multi-dimensional
    approach to well-being, resulting a.o. in the
    Hows Life? report
  • Clio Infra project, global network of economic
    historians to measure various dimensions of
    long-term evolution of world economy 1500-2010.

25
Well-being and the OECD
Better policies for better lives
Better measures
Subjective well-being Social contact Governance
26
The Hows Life Well-being Framework
27
Measuring well-being
28
Aim of cooperation
  • Present state-of-the-art estimates on various
    dimensions of development of well-being in world
    economy from 1820 to present (GDP and beyond)
  • Contribute to the discussion about the broadening
    of the welfare concept used to characterize
    socio-economic development
  • Indicate relevance of going beyond GDP, also in
    historical analysis

29
The importance of historical statistics
30
Dimensions covered in How Was Life? book
Dimension Indicator(s)
Economic standard of living GDP per capita
Inequality Income inequality Real unskilled wages
Health Status Life Expectancy Height
Education and Skills Educational attainment
Personal security Homicide, Incidence of warfare
Civic Engagement and Governance Political institutions
Environmental Quality SO2 CO2 Species abundance
Gender Inequality Various indicators composite index
Overall indicator of Well-Being  Composite indicator (experimental)
31
Statistical Quality
  • Data for 25 major countries and another 100
    since 1820.
  • Important issue of quality of underlying sources
  • Four levels of statistical quality indicated for
    each data point based on credibility of source,
    accuracy of method and comparability across
    countries and over time

32
Results
  • In general very strong correlation of each
    indicator with GDP per capita, though less
    unequally distributed
  • Exceptions low/negative correlations in
    Inequality, Security, and Environmental quality
    domains
  • Relationship between GDP per capita and other
    measures of well-being changes over time

33
Correlation with GDP/c over time
34
Changing relationship
  • 19th century early growth paradox
  • Rapid industrialization and growth did not result
    in increased well-being
  • Early urbanization and industrialization had
    strong negative externalities
  • Standard of Living debates
  • Changes after about 1870

35
Changing Relationship
  • After 1950 increases in well-being become
    (increasingly) autonomous
  • Africa after 1970 Latin America 1980s Japan
    after 1990 slowdowns of economic growth do not
    necessarily result in slowdown increase
    well-being
  • Different ranking of western Europe and Offshoots
  • Relevant for Europe after 2007?

36
Composite variable/region
37
Per capita GDP
38
Composite indicator std. GDP/c
39
Preston-curve GDP/c life expectancy
40
Segmented relation per capita GDP combined
wellbeing indicators
41
New results
  • Changing link between GDP per capita and Income
    Inequality
  • 19th century rich countries are more unequal
    (have larger surplus that can be distributed)
  • After 1980 poor countries are more unequal
  • Rich countries went through egalitarian
    revolution
  • Recent increase in inequality (after 1980) more
    marked in poor countries

42
Resulting HDI
43
Resulting HDI
44
Resulting HDI
45
Resulting HDI
46
Resulting HDI
47
But why?
  • Explain success and failure in world economy
  • Institutions versus Geography
  • Agency

48
Jared Diamond Guns, Germs and Steel
  • Importance geography
  • Why did Neolitihic revolution start in Middle
    East?
  • EurAsia easy spread crops and ideas first
    cities, states, iron technology

49
Daron Acemoglu en James Robinson
  • Institutions extractive versus inclusive
  • Reversal of Fortune 1500-present (Peru versus
    North America)

50
Amartya Sen
  • Development as Freedom
  • Capabilities approach
  • Agency enhances economic development
  • Female Agency smart economics
  • Quality-Quantity switch

51
Institutions as explanation
  • New Institutional Economics (North, Acemoglu
    Robinson) most promising explanation of such
    trends
  • Institutions rules of the game of society
    informal (customs) vs. formal (laws)
  • Determine how people interact
  • Related to trust
  • Embedded in culture, religion

52
Institutions and power
  • Institutions are related to power
  • They determine who are powerholders and how much
    power they have, and whether it is constrained or
    not
  • At various levels the state, the firm, the
    family
  • NIE power structures determine economic
    development (Acemoglu Robinson)

53
How to test these ideas
  • Example did female agency matter
  • Classification family systems on basis of
    antropological data
  • Inheritance, monogamy/polygamy,
    consensus/arranged marriage, nuclear/extended
    families
  • Female-friendly index Eurasia

54
Agency of women in historic family systems
55
Hypothesis Emmanuel Todd
  • Original family system of hunter-gatherers was
    relatively female friendly
  • Rise of settled agriculture resulted in decline
    position women (heavy plough)
  • State formation after Neolithic Revolution
    reinforced this process
  • Strong position of women only in marginal
    regions EurAsia, at distance from centers
    Neolithic Revolution (Middle East, Northern
    India, North China)

56
Example marriage system
  • Europe rise of European Marriage Pattern (EMP)
    marriage based on consensus between spouses, who
    select their partner themselves and set up their
    own household (De Moor and Van Zanden 2010)
  • China patriarchical marriage system, where
    marriage is arranged by family, and girl moves in
    with household boy

57
Consequences
  • Age of Marriage low in China (women 12-15),
    high in Europe (women 25-28)
  • Son-preference in China, no gender preferences in
    Europe
  • Europe more agency for women
  • China all education invested in sons (for
    exams) Europe education more balanced between
    males and females
  • Europe gradual rise of overall level of human
    capital China stagnation?

58
Age at marriage ca. 1900
59
Marriage and agency
  • balanced power relations in Europe led to high
    age of marriage, no son preference, more
    investment in education women, and gradual shift
    from quantity to quality
  • Less balanced power relations in China
    resulted in high fertility for women (who married
    very early)

60
Effects on human capital formation
  • China highly trained civil servants, but big gap
    between men and women (Qing 40/10)
  • China stagnation state demand for public service
    leads to stagnation in level of human capital
    formation (van Leeuwen et.al. 2013)
  • Europe gender gap much smaller, women also
    receive (basic) education better preconditions
    for quantity-quality shift

61
Results of recent work
62
Example 2 State Formation
  • Reversal of fortune in state formation
  • China from very strong state under Sung to weak
    state during Qing (Liu Guanglin 8 of GDP to
    2-3 of GDP)
  • Europa process of state formation resulting in
    high state capabilities of 19th/20th centuries
    (8-12 of GDP in 19th century)
  • Rooted in different relationships between state
    and inhabitants

63
Fundamental problem of the state
  • Agency state is agent of population, should work
    in common interest
  • But may turn against citizens has its own
    logic/independence
  • Why support a state (by paying taxes) which can
    use its power against its own citizens?
  • Required institutions that constrain power of
    the executive
  • Or institutions that ensure that power state will
    be used for interest of citizens

64
State formation in Western Europe
  • Tradition of citizenships cooperative
    relationship between citizens and state emerged
    in city states of Middle Ages
  • Feudal tradition of power sharing and bargaining
    between King and his nobles between King and
    cities (in Parliaments), between state and church
  • Most successful European states (England after
    1688 Netherlands after 1572 France after 1789)
    combine these traditions taxation and
    representation resulting in democratization

65
State Formation in China
  • State based on professional bureaucracy,
    recruited via examination system guarantee
    against using state for own interest
  • But all power in principle concentrated in
    emperor
  • No contract between subjects and state
  • Dramatic changes in relationship between state
    and citizens (for example early Ming late Ming)
  • Problem of legitimacy of foreign dynasties such
    as Manchus
  • Qing stagnation state, growing corruption

66
Conclusion
  • Much work on measuring global inequality
    1500-2010 GDP and beyond GDP
  • Exciting theories about development paths of
    regions/countries
  • Western Europe balance between agency and
    institutions (freedom and rules)
  • Old Centres of Neolithic Revolution too much
    hierarchy (ergo reversal of fortune)
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