workers move from traditional agricultural sectors to more dynamic industrial and service sectors, and new incomes are estimated for these movers. Finally, consistent with an overall growth rate of real income per capita, changes in labor remuneration by skill level and sector are applied to each worker in the sample depending on their education and sector of employment. The number of workers changing sector of occupation and the growth differential in labor remuneration which are used to “shock” the micro-data are consistent with the results of the global computable general equilibrium (CGE) model described in the previous Section. (Note that the outcomes of the CGE model are also influenced by the same demographic changes described above.) The sequential changes described above reshape national income distribution under a set of strong assumptions. In particular, income inequality within population subgroups formed by age, skills, and sector of employment is assumed to be constant over the period. Moreover, data limitations affect estimates of the initial inequality and its evolution. Although consumption expenditure is a more reliable welfare measure than income, and its distribution is normally more equal than the distribution of income, consumption data are not available for all countries’ surveys. To get a global picture, the present study had to include countries for which only income data were available. Finally, measurement errors implicit in purchasing power parity exchange rates, which have been used to convert local currency units, also affect comparability across countries. The resulting income distribution should thus not be seen as a _forecast_ of what the future distribution might look like; instead it should be interpreted as the result of an exercise that captures the _ceteris paribus_ distributional effect of demographic, sectoral, and economic changes.

# 3 The World Economy in 2030

## 3.1 Developing countries will grow faster due to favorable demographic and productivity trends

Under the baseline scenario of this paper, global GDP grows at an average annual rate of 2.9 percent between 2005 and 2030.<sup>4</sup> Measured at constant 2001 prices the global economy would reach $75 trillion in 2030 up from $35 trillion in 2005, an overall increase of some 2.1 times (Figure 2). The developing-country GDP would jump from $8 trillion to $24.3 trillion increasing its global share of output from 23 percent to 33 percent.<sup>5</sup>

> younger heads. For a complete technical description of this re-weighting procedure, which in addition to the age structure also involves education attainments, see Bussolo, De Hoyos and Medvedev (forthcoming). 4 This represents a modest acceleration of what was observed between 1980 and 2005. For high-income countries, projected growth rates decrease slightly (from 2.0 to 1.9) but a more significant acceleration is attributed to developing countries (from 2.4 to 3.1).

> 5 Evaluated at 2001 market exchange rates and constant prices. The rapidly emerging economies would normally be associated with rising real exchange rates so that their weight in the global economy will actually be measurably higher in value terms than in constant price volume terms.

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