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ICP 2021: Intercountry income inequality

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Intercountry income inequality

Intercountry income inequality can be measured by the population-weighted Gini measure of income inequality based on PPP-based GDP per capita.1

Figure 12 compares the distribution of GDP per capita in 2021, 2017 and 2011, and the three data sets are plotted as Lorenz curves of cumulative percentages of expenditure against the cumulative population, beginning with the poorest economy.2 The 167 economies common to all three ICP cycles are included. A 45-degree line represents perfect income equality. The Gini coefficient measures the distribution of expenditure across economies and the extent to which an economy deviates from the hypothetical distribution if all economies had the same share of global GDP as their share of the global population. It reflects the area between the Lorenz curve and the line of equality, with a value of 0 reflecting perfect income equality and a value of 1 representing perfect income inequality.

The intercountry Gini coefficient for PPP-based GDP per capita improved over the years, from 0.486 in 2011, to 0.466 in 2017, to 0.458 in 2021. The share of the global population living in economies where the mean GDP per capita is below the global average decreased from 75 percent in 2017 to 56 percent in 2021. This is largely due to the GDP per capita for populous China being slightly higher than the global mean in 2021.

The same plot can be made for PPP-based AIC per capita (figure 13) for which the Gini coefficients fell from 0.504 in 2011 to 0.469 in 2017 to 0.456 in 2021. The share of the global population living in economies where the mean AIC per capita was below the global average was nearly 73 percent in 2021.

1/ PPPs are statistical estimates and should be treated as approximations of true values, subject to sampling, measurement, and classification errors. They should not be used as indicators of currency under- or overvaluation. ICP Results are based on data supplied by participating economies to the global and regional implementing agencies, and produced in accordance with ICP methodology. Results are not deemed to be national official statistics.

2/ The standard ICP methodology between the two most recent 2017 and 2021 ICP cycles has been maintained. However, in ICP 2021, the Commonwealth of Independent States (CIS) region was linked through the standard global core list approach, unlike in ICP 2017, when the CIS region was linked through the Russian Federation, which participated in both the OECD and CIS comparisons. For ICP 2017, the Russian Federation's results are based on the OECD comparison, and for ICP 2021, they are based on the CIS comparison. Furthermore, the Asia and Pacific region moved to the standard ICP approach for estimating housing PPPs based on rental and volume data during the ICP 2021 cycle. The standard approach was utilized for the revised ICP 2017 results and ICP 2021 results, both at the regional and global levels, instead of the previously utilized reference volume approach.