Introduction and Overview

In the last three decades, the pattern of world development and its relationships with inequality have known a critical reversal. Following two centuries of ‘great divergence’ (Pomeranz, 2000; Pritchett, 1997) during which the North (advanced countries) had benefited from growth rates significantly higher than those of the South (developing countries), the recent surge in growth experienced by a majority of less developed economies seemingly beckons a new era of ‘great convergence’ on the world stage. This has clearly resulted in a decrease in between-country inequalities in terms of income per capita. However, it has not been accompanied by a simultaneous decrease in within-country inequality. Following several decades of reduction, income inequality has increased in almost all advanced countries, sometimes dramatically, over the last 30 years. In the South, the picture appears rather mixed (Wood, 1997). However, the general diagnosis is that of an increase in inequality (Goldberg and Pavcnik, 2007). Finally, if at the world level, the rise of inequality during the last two centuries has been driven by between-country inequality rather than by within-country inequality (Schultz, 1998; Williamson, 2002; Bourguignon and Morrison, 2002), the last three decades have witnessed opposite causality since between-country inequality tends to decrease and within-country inequality to increase.