World Bank Failing to Report Rich Countries' Income Distribution

Cape Times (South Africa), July 25, 2014 | Go to article overview

World Bank Failing to Report Rich Countries' Income Distribution


THE WORLD Bank subtly dodges all debate about income inequality in rich countries. Any good servant knows to steer clear of family fights. Why should this be less true of public servants?

So it is that the World Bank - which serves the countries of the world - appears to be avoiding one of the most hotly contested political economic issues in the rich countries: trends in income distribution. It is doing so not by misrepresenting information, but simply by failing to report it.

One might have expected the World Bank, which ably assembles and organises so much economic and social data, to help shed light on the question of whether income distribution is steadily becoming more unequal.

After all, careful study of historical tax data bearing on this question has made an unlikely international superstar of the modest French economist, Thomas Piketty.

It may be somewhat surprising, therefore, to learn that World Bank data provided no more than a single observation of income distribution for any of the richest countries from 1960 to last year.

Handling the truth

The data in question are the shares of total income of various deciles and quintiles of the population. The World Bank compiled those data from the results of household survey data provided by member countries. As with other data series, the quality and quantity of income distribution data tend to improve as countries get richer.

If we line countries up by per capita income, the World Bank steadily provides more and more income distribution data as income rises. This is normal, as poorer countries generally have weaker data-gathering capacity than richer countries and the World Bank relies on data provided by members.

The steady improvement in the availability of income distribution data works well - until it comes to an abrupt stop when income rises above about $20 000 (roughly the income level of Estonia; R210 702).

In fact, the World Bank database contains not a single country with income higher than Slovenia's ($26 000) with enough information to calculate a change in income shares (of course, a minimum of two observations are needed to look at changes).

Among the countries thus conveniently excluded from this potentially embarrassing exercise are Greece, New Zealand, Korea, Spain, Italy, Iceland, Japan, France, the UK, Ireland, Finland, Belgium, Australia, Germany, Bahrain, Canada... and so on (the total number of these richest countries is 35).

An odd silence

Mind you, it is not as though the World Bank's standard operating procedure is to report only one year's worth of income distribution data per country.

Indeed, for the 189 countries with per capita income data, there is an average of 4.6 observations of income distribution per country. That is, if you drew the name of one of these 189 countries at random, you could expect to find income distribution numbers for four or five years before 2013.

If and when those data points are available, you can then ask some questions. Is there evidence of a trend in income distribution? Has inequality been rising?

If the country you drew by chance turned out to be Brazil, you would find 26 years of income distribution data. For Poland, it is 19 years of data, for Thailand 14 and Turkey 11.

All told, of the 189 countries in the World Bank's database, 107 have income distribution observations for at least two years, so at least one change in income shares can be observed. …

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