Iran’s place in the world distribution of income
Branko Milanovic is a leading authority on the global distribution of income. His influential 2005 book, Worlds Apart provided the most comprehensive account of how global inequality has evolved over time. He has just completed the sequel (The Haves and the Have-Nots, Basic Books, forthcoming), which updates his earlier analysis using survey data on income and expenditures from 119 countries for 2005. He finds that despite rapid economic growth in China and India, two very large and poor countries, in recent years global inequality has remained constant and very high (Gini index = 0.80). I asked him to help me understand where Iran was located in the global distribution of income, and he produced this amazing graph.
To read this graph, note that on the vertical axis is the position of a person in the world distribution of income and on the horizontal axis her position in her country. So, for example, the person with median income in Iran (10th ventile) is approximately at the 75% percentile of the world distribution and the same person from Germany is above the 90% percentile of the world distribution.
How surprised you are by what you see here depends on your priors about inequality in the countries included in this graph. Few readers familiar with the United States will be surprised to learn that the poorest person in the US, who occupies the 60th percentile in the global income distribution, is much poorer than the poorest person in Germany (or even Spain–not shown here). As one of the richest countries in the world, the United States is notorious for its underclass, which is in part racially defined. Interestingly, beyond the poorest decile, Americans and Germans look nearly identical from the viewpoint of income.
It may surprise more people that the poorest person in the US has about the same income as the Iranian located at the 20% percentile. So, if the poorest person in the US visited Iran, he or she would have reason to envy the living standard of 80% of Iranians, whereas the same person from Germany would feel worse off only compared to the top one-third of Iranians.
What may surprise many — it certainly surprised me — is that Iran’s distribution of income (in 2005) looks worse than that of the US, even though the two countries have about similar Gini indices of inequality–in the 0.40-0.45 range. In fact, Iran appears to have just about the worst distribution in this group of countries. The graph shows that most of the inequality in the US is the result of severe poverty, whereas Iran’s inequality is caused by inequality at he two extreme ends of the distribution, the very poor and the very rich. Iran’s poor are worse off than the poor in Egypt and Malaysia, while its rich are represented in the top decile of the world’s income distribution.
Iran is not all that unequal compared to most other countries, especially those in Latin America (Brazil’s Gini=0.60) and Sub-Saharan Africa. The graph below (also from Milanovic) depicts the Gini index of all the countries with requisite data against the so-called Kuznets curve, which relates inequality to the country’s income per capita (measured in 2005 PPP dollars). Iran is not only more unequal than other Middle Eastern countries, such as Egypt, Jordan, Morocco and Syria, it is also located above the curve, which means that it is more unequal than warranted by its income–not to mention the social justice ideals of the 1979 Islamic Revolution.