Global Consumption Disparities: Unveiling a Persistent Divide

This paper delves into global consumption inequality through empirical and theoretical analyses. First, countries are categorized into five groups according to their consumption levels to uncover worldwide consumption patterns using the Penn World Tables 10.01 dataset between 1970 and 2019. The results imply that the inequality in per capita consumption is significant and persistent across time. Moreover, there is a ``Caste System'' in world consumption: countries belonging to the lowest class struggle to climb up to the upper consumption groups, whereas the countries in the top class keep their seats over time. Second, the saving rate differences between ``climbing'' and ``falling'' countries are empirically tested based on the Solow-Swan framework, which shows that the level of the saving rate determines the level and the growth rate of per capita consumption. Since the analyses show that the climbing countries have significantly higher saving rates than falling countries, a higher saving rate is conducive to increasing a country's per capita consumption level and growth rate in the long run.