household income; 2) inequality across countries based on population-weighted GDP per capita or household income; and 3) global inequality using household-level data from surveys. The first two concepts refer to inequality between countries. Relative to concept 1, inequality as measured by concept 2 reflects the weight of relative population size in addition to discrepancies in average incomes. The within-country component of inequality is nonetheless critical. It is possible, for instance, that a low-income country could catch up on average per capita income at the expense of rising inequality among its residents. This effect will neither be captured by concept 1 or concept 2. Among the three concepts of global inequality, the individual-based concept 3 is the only one that takes into account inequality between as well as within countries. It requires, however, a large amount of harmonized micro data to perform any attempt for international comparison. In this paper, we analyze global inequality using the individual-based (concept 3) approach.

From 1950 to 2000s, inequality between countries using concept 1 increased, while inequality using concept 2 decreased. However, during the last decade, both concepts show a dramatic reduction in inequality (Milanovic 2013). The individual-based inequality (concept 3) also showed a decreasing trend between 2000 and 2010 (see Milanovic 2013; Lakner and Milanovic 2016), but at a slightly smaller reduction when compared to the pattern of concepts 1 and 2. Since concepts 1 and 2 are about between-country inequality, the individual-based result somewhat suggests that within-country component of inequality may have increased in this period.

Lakner and Milanovic (2016) show that (individual-based) global inequality, as measured by the Gini index, dropped from 72.2 in 1988 to 70.5 in 2008. This recent decline in global inequality can be largely explained by the economic progress during the last decades in low- and middle-income countries, particularly by the sustained growth of populous countries like China and India.<sup>6</sup> Increased trade benefited low-skilled workers in China, India and partly from the Soviet bloc. Demand for the goods they produced went up, and so did their wages. The opposite happened for low-skilled workers in high-income countries. Also, increased global economic integration accelerated diffusion and adoption of technology, which in turn supported the economic boom in developing countries before the recent Great Recession.<sup>7</sup> The resulting economic prosperity reduced the gaps in income per capita between high-income and developing countries, which was the main driver of the reduction in global inequality.

Notwithstanding this recent reduction, the world as a whole remains very unequal. In fact, if the world were a country it would have a highest Gini in 2008. Also, global convergence has been accompanied with increasing national divergences. Lakner and Milanovic (2016) estimates that the Gini indices have increased for many countries and regions from about 1988 to 2008: 38.2 to 41.9% for mature economies; 32.0 to 42.7% for China; 31.1 to 33.1% for India; and 53.5 to 58.3

> 6 World Bank (2011) and Bussolo et al (2012).

> 7 See, for examples, World Bank (2011) for the multipolarity of global growth and Arbache et al. (2010) for the case of Africa.

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