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WPS 3243

Competing Concepts of Inequality in the Globalization Debate
Martin Ravallion*

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World Bank
1818 H Street NW, Washington DC, 20433, USA

Differences in the value judgments made in measuring inequality underlie the conflicting factual claims often heard about how much poor people have shared in the economic gains from globalization. Opponents in the debate differ in: (i) whether they weight people or countries equally in assessing the extent of inequality; (ii) the weight they give to vertical inequalities versus horizontal

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inequalities and (iii) the extent to which they care about relative inequality versus
absolute
An objective of the series is to get the findings out quickly, even if the presentations are less than fully polished. The papers carry the names of the authors and should be cited accordingly. The findings, interpretations, and conclusions expressed in this paper are entirely those of the authors.
They do not necessarily represent the view of the World Bank, its Executive Directors, or the countries they represent. Policy Research Working Papers are available online at http://econ.worldbank.org.

* Martin Ravallion is with the World Bank’s Research Group. For comments the author is grateful to
Abhijit Banerjee, Jean-Yves Duclos, Francisco Ferreira, Emanuela Galasso, Ravi Kanbur, Peter Lambert,
Branko Milanovic, Berk Ozler, Lant Pritchett, Eric Thorbecke, Dominique van de Walle, Adam Wagstaff and participants at the workshop for the Brookings Trade Forum, 2004. Email address: [e-mail] .

Introduction
How much are the world’s poor sharing in the gains from the economic growth fueled by greater economic integration? There are seemingly conflicting answers from the two sides of
However, that sensitivity does speak to the need for statistical caution in inferring that inequality is falling between countries from the population weighted series in Figure 3. How confident can one be in claiming that inequality is falling when that no longer holds if one drops just one country?

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This has been noted by Schultz (1998), Sala-i-Martin (2002) and Milanovic (2004).

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As we have seen, the implicit values in empirical work matter greatly to the assessment one is drawn to make about the distributive justice of current globalization processes. And arguments can be made both ways.

Vertical vs. horizontal inequalities
The empirical question at stake in the globalization debate is often posed in terms of how mean gains from reforms vary by pre-reform income. Do the mean proportionate gains rise or fall as income increases? Studies deemed to be favorable to the supporters of globalization are those that find that the mean proportionate gains are just as high for the poor as the non-poor
(see, for example, Dollar and Kraay, 2002).
This perspective emphasizes what can bet termed the “vertical” impacts of reform,