Pedro Olinto and Jaime Saavedra T he world has become considerably less poor in the past three decades (fgure 1). In 1981, almost three- fourths of citizens in the developing world lived on less than $2 a day. This rate has dropped dramatically so now 43 percent are poor. Moreover, despite a 35 percent increase in global population, there are slightly fewer people living on less than $2 a day today (2.47 billion) than there were three decades ago (2.59 billion). Extreme poverty declined even more. The share of those living on less than $1.25 a day—the minimum level of consumption needed to meet basic human needs in the poorest countries—has fallen by more than half, from 52 percent in 1981 to 22 percent in 2008. Hence, 1.29 billion people live in abject poverty. Progress is undeniable, and preliminary estimates for 2010 Introduction to the Inequality in Focus Series THE WORLD BANK Poverty Reduction and Equity Department : : www.worldbank.org/poverty : : Volume 1, Number 1 : : April 2012 INEQUALITY in FOCUS W e will remember 2011 as the year when inequality and equity issues came back into the spotlight. The debate over the growing socioeconomic disparities and their implications for political stabil- ity and sustainable growth left the academic seminar rooms to permeate the streets, the popular media, and the blogosphere. From Arab youth clamoring for better job opportunities, to Chilean students protesting for a cheaper university education accessible to all, to Occupy Wall Street, popular demonstrations of frustration with the status quo have made governments and international organizations more attentive to equity, social exclusion, and democracy issues. It is high time for the World Bank—as a leader on the production and dissemination of knowledge on poverty reduction and equity issues—to engage more broadly with the global community and help boost and enrich the ongoing debate. While the 2006 World Development Report, Equity and Development, has made an important contribution to the theme, there is renewed demand for the World Bank’s leadership in systematizing and dissemi- nating current knowledge. This is the frst issue of a new brief, Inequality in Focus. The overall objective of the series is to inform the public policy debate on equity, inequality of opportunity, and socioeconomic mobility. It will feature articles written by World Bank staf, as well as researchers and policy makers from the broad development community. The language and style will aim to convey the results of recent analysis in an intuitive and accessible manner. We start the series with an overview of global poverty and inequality trends, an analysis of the recent decline in income inequality in Brazil, and an examination of inequality of opportunity. An Overview of Global Income Inequality Trends show that the downward trend of poverty has continued. But 2.5 billion people living in poverty and 1.3 in abject poverty are still extremely high fgures. Moreover, does this signifcant increase in the incomes and consumption of the poor mean that the world has become a more equitable place? Is global income more evenly distributed today than it was 30 years ago? The answer depends on how we measure disparities in global income. For instance, if we assume that all individuals living in one country earn the same income, an amount equal to that country’s average GDP per capita, we can compute what is known as international income inequality. This is what is shown in fgure 2. As seen, international income inequality has been dropping steadily since the early 1980s. Initially, this fall was due mainly to rapid growth in China. But since the early 2000s, this decline is observed even without including the East Asian giant. Higher growth rates in almost all developing countries, including in sub– Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized