Economics Letters 19 (1985) 295-301 North-Holland 295 THE TREND AND THE MEASUREMENT OF WORLD INEQUALITV OVER EXTENDED PERIODS OF ACCOUNTING Esfandiar MAASOUMI Indrum Unirersity. Bloomrngton, IN 47405, USA Unroersity of Southern Californro, Los Angeles, CA 90007, USA Jin Ho JEONG In&m Unruersity, Bloomington, IN 47405, USA Received 11 April 1985 The principal result of this paper is the demonstration of a method for measuring an index of (e.g.) nominal GNP over extended periods of time and the inequality thereof. ‘Snap shot’ inequality for specific points in 1964. 1972 and 1980 is also reported and decomposed for six subgroups in 122 countries. 1. Introduction The traditional practice of measuring inequality at specific points in time has long been subject to the criticism that such ‘snap shots’ reflect too many transitory effects. For a few countries attempts have been made to compute a measure of individuals’ life or permanent incomes and the inequality in the distribution of such a measure. For example, while primarily concerned with ‘mobility’, Shorrocks (1980) computes U.S. inequality in the total sum of incomes over the period under study in the Michigan Panel Study of Income Dynamics. Here we compute four different aggregate measures of GNP (and per capita GNP) over the period 1964-1980. One of these measures corresponds roughly to the simple sum of GNP’s, but the other three allow for different levels of substitution of GNP at different points in time. A further nuance here is the application of four different members of the Generalized Entropy (GE) class of decomposable inequality measures to international data. An extensive study considering several welfare attributes in addition to GNP is reported in Maasoumi and Jeong (1985). The method of aggregation or averaging of incomes used here is based on the information theoretic approach of Maasoumi (1985). This technique is briefly discussed in the next section. The desirability and properties of the GE measures is discussed in the axiomatic treatment of Shorrocks (1984). This family includes both of Theil’s measures and members which are ordinally equivalent to such other well known indices as coefficient of variation, Herfindahl, and the class of measures proposed by Atkinson (1970). With developmental and geographical considerations in mind, the 122 countries in our sample were divided into six exclusive and exhaustive subgroups. Inequality was then decomposed into the between- and average within-group inequalities in order to present a more informative account of world inequality and its sources. Since the traditional approach is a special case of ours, we are able 016%1765/U/$3.30 0 1985, Elsevier Science Publishers B.V. (North-Holland)