INTRODUCTION

Poverty and inequality are certainly among the main concerns in the developing world. A typical developing country is characterized by high levels of material deprivation and large dispersion in individual well-being, at least when compared to a typical high- income economy.

Whereas Chapter 8 of this Handbook deals with poverty and inequality in advanced economies, this chapter documents patterns and changes in the developing countries. There is no need to argue about the relevance of including a separate chapter in the Handbook: The developing world is home of 85% of total world population and bears levels of poverty and inequality far higher than in the rich nations. Whereas in a typical developing economy the share ofpeople striving to survive with less than $2 a day is more than 30%, that share is close to zero in the industrialized countries. In fact, on this basis poverty is an issue exclusively of the developing world. The differences in income inequality are presumably also large, although the comparisons are hindered by the fact that national household surveys typically capture income in developed countries and consumption expenditures in developing ones.

High poverty and inequality are pervasive characteristics of the developing world; however, they are not immutable features of these economies. There is convincing evi­dence pointing to a robust decline in the levels of absolute income poverty over the last decades and substantial progress in the reduction of deprivation in various nonmonetary dimensions—education, health, sanitation, and access to infrastructure.

This chapter reviews the empirical evidence on the levels and trends in income inequality and poverty in developing countries. We focus the analysis on the income/ consumption approximations to welfare; in particular the chapter deals mainly with rel­ative inequality across individuals in household consumption expenditures per capita, and with absolute poverty defined over that welfare variable, and considering alternative international lines defined in U.S. dollars adjusted for purchasing power parity (PPP). This choice is restricted by space limitations and does not imply ignoring that a general assessment of poverty and inequality should also include other nonmonetary dimensions (e.g., health, education) and other monetary variables (e.g., wealth). Other chapters in the Handbook contribute to fill those gaps.

The analysis in this chapter is mostly focused on inequality and poverty within coun­tries and not within supranational regions or in the world.^[448] Although issues of global inequality are increasingly relevant, inequality is still primarily a national concern. People are generally worried about inequality mainly in their countries, and public policies are typically aimed at reducing disparities among individuals within national boundaries.

The empirical evidence shown in this chapter is drawn from the academic literature, regional and country papers, and open-access databases, in particular the PovcalNet pro­ject developed in the World Bank. Although most of the evidence is based on statistics obtained from national household surveys, we also report results from tax records (the World Top Incomes Database, WTID) and international surveys (the Gallup World Poll) to illustrate some issues. Even though the main purpose of the chapter is to present basic evidence on levels and trends, we also briefly review the main discussions on determi­nants of recent changes in inequality and poverty.

The rest of the chapter is organized as follows. In Section 9.2 we briefly characterize the economies in the developing world and discuss the data sources and some measure­ment issues. The following two sections are assigned to the main topic in this volume— inequality. In Section 9.3 we document the levels of income inequality in the developing world, and in Section 9.4 we summarize the evidence on trends since the early 1980s. The next two sections repeat the sequence for poverty: Section 9.5 compares levels across countries, and Section 9.6 summarizes trends and discusses the evidence at the regional level.^[449] Section 9.7 closes with a summary and some final remarks.

9.2.