1. 1. Paneuropean University January 10, 2014 Position Paper on Bourguignon, Francois and Christian Morrisson, Inequality Among World Citizens: 18201992, American Economic Review, September 2002 Antonia FICOVA Doctoral Student at Faculty of Economics and Business Paneuropean University, Bratislava antonia.ficova@yahoo.com
2. 2. Bourguignon, F.and Christian, M. (2002) examined in their research paper distribution of well being among world citizens during the last two centuries. The question is: why we see inequality of citizens around the world? They argued that in the early 19th century most inequality was due to differences within countries and later it was due to differences between countries. In this regard, their paper quantifies the importance of aggregate economic growth, population growth, and the structure of domestic income inequalities in this process. They pointed out that inequality among countries is a key factor in explaining world inequality. As a first, they took a broad historical view on this subject. If we look at variables that they used for example population, distribution of income, Lorenz curve, rates of population growth, life expectancy, GDP per capita across countries that showed determinants of the economic growth of nations. They also mentioned variable of Gini coefficient since industrial revolution was under way in Britain and beginning in France, World War I, II. First of all, i will look at following factors described in their research paper. First, Income disparities within countries. Income inequality, as they described, is a fact of economic life. However, different people are born with different gifts and choose to pursue them differently. Those gifts carry unequal earthly rewards, one of which is in the form of income. Disparities of income. In other words, we will not all make the same income, and this is a fact of economic life. Efforts to lessen income inequality run counter to the way we are created, to the human condition. Second, Changes in the nationality of individuals at various levels in the world income hierarchy. A society characterized by economic freedom and prosperity is one that provides opportunities for individuals to lift themselves into higher income quintiles. Nevertheless, unless we all make an equal income, we will always be able to divide people into income quintiles. What matters is not so much how wide the gap is, but the ability to move from one quintile to the next and the relative prosperity of those in the bottom quintiles. Third, Poverty. According their results the poverty and extreme poverty ratios showed the proportion of the world population below two absolute income
3. 3. thresholds. In other words, while the poor declined steadily as a proportion of the population during the last two centuries, the number of poor people continued to rise. So the number of people in extreme poverty rose as well. From my view, it is true then income inequality is an economic reality manifested from the Biblical principle of uniqueness. More to the point, we are created differently, and some of us will earn higher incomes than others. Income is not the only earthly reward either. Its just the only reward bestowed by the market. Fourth, Mobility. They argued that due to mobility of regional groups of individuals within the world income scale is responsible for changes in that composition. More to the point, that resulted to complex combination of relative changes in countries relative mean income, population, and domestic income distribution. They also described that mobility matrices are due largely to the growth performance of a small number of countries or country groups. Fifth, Life Expectancy. Results coming out from their research showed that life expectancy in the world has more than doubled, rising from 26 years in 1820 to 60 years today. They pointed out that world inequality seems to have fallen since 1950 as a result of the pronounced drop in international disparities in life expectancy. So we can say that disparities in life expectancy are back to the levels before the big divergence of the 19th century. In my opinion, income inequality is a natural part of the human condition. Viewed in this light, we are created uniquely and that means that there is no universal Biblical standard for income equality. The question that must be addressed Biblically and through public policy is the relative prosperity of the poorest among us and their ability to gain income through the pursuit of their gifts. To that end, we need an opportunity society which embraces our uniqueness, unleashes our creativity and potential and serves the common good. Viewed in this light, the market is only capable of rewarding through profit and it punishes with losses. In other words, these are in terms of dollars. Because the goods and services we bring to the market are valued subjectively by the purchaser, income inequality is a fact of economic life and economics pervades all of our life choices.
4. 4. The question is: Are there fundamental aspects to our economic condition, a world of choice under scarcity, that lead to an unequal distribution of income? Yes, there are and understanding them is important for knowing what policy is able or unable to accomplish, as well as what policy should attempt to accomplish from a Biblical perspective. We have to pay attention to family structure as well. However, family norm went from two-parent, one-earner families to either low-income single- parent families, etc.