However, it is important to point out that the 1988 and 2012 Lorenz curves cross at a very high income level. It is well established that the GE(2) measure is sensitive to extreme values (Cowell and Flachaire, 2007). Hence it is important to understand whether the disagreement over the direction of change in inequality happens over a meaningful range of preferences. This can be done by examining the direction of change in the Atkinson index ����, another inequality measure, for different values of �, the inequality aversion parameter. The gap between the Atkinson indices in 1988 and 2012 falls with � (not shown), i.e. with very low aversion, inequality levels are very similar in the two years. The minimum value for which � is typically reported is around 0.25 (e.g. by the US Census Bureau, see Proctor et al., 2016). Even with ��0.1, which is a very low level of inequality aversion (and thus a low weight is attached to lower incomes), the Atkinson index increased by 5% between 1988 and 2012.<sup>15</sup> Therefore, while there is no strict Lorenz dominance between 1988 and 2012, the standard measures all agree that inequality increased.

Overall EAP inequality can be decomposed into two components, which arise from income differences within and between countries, respectively. Between 1988 and 2012, the between component of the GE(0) measure declined, while the within component increased both in levels and as a share (Table 2, Panel B).<sup>16</sup> Therefore, the increase in overall EAP inequality appears to be driven by increasing inequality within countries, in particular among those with a high population share, which is consistent with changes in the population-weighted Gini index. As a result, the contribution of consumption differences within countries to total inequality rose from 68% to 92% (Table 2, Panel C).

This evolution of within-country inequality is stronger than the results at the global level, where within-country inequality also increased but between-country differences remain the dominant source of inequality (Lakner and Milanovic, 2016). It is perhaps not surprising that between-country differences matter more at the global level compared with a regional analysis, as one might expect countries’ average income or consumption levels to be more similar within a region.

A similar analysis of regional inequality in Sub-Saharan Africa (Jirasavetakul and Lakner, 2016) shows a higher level of inequality than in East Asia, with the African Gini index increasing from 52 in 1993 to 56 in 2008. In contrast to EAP, Africa’s within-country component gradually declined, or put differently the increase in overall Africa inequality has been driven mainly by increasing inequality between countries (i.e. differences in growth rates

> 15 Atkinson (1975) provides the following intuition in terms of a transfer between two people, one of whom has twice the other’s income. For someone whose aversion parameter ��0.1, a transfer of $1 from the rich to the poor person would only be acceptable if $0.93 reaches the poor. With ��0.25, the requirement would be $0.84 for every $1 transfer.

> 16 The measures of inequality in the GE-class are additively decomposable by subgroup. The decomposition of GE(0) uses population shares, while the decomposition of the GE(1) index is in terms of consumption shares. Therefore, the within-country component of GE(0) can be interpreted as the residual inequality after equalizing average consumption across EAP (Anand and Segal, 2008).

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