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International inequality in the basic needs indicators
Journal of Development Economics
10 (1982) 113-l 17. North-Holland
I
Publishing
Compaq
ALITY IN CATORS
Rati RAM* Il”ashington State iJniwrsity,
Pullman,
WA 99164. USA
Received March 1981, final version received May 198 I data for nearly 100 countries, cross-country inequality indexes for five major ‘basic needs’ indicators are computed and compared with income inequality indexes. Except for physician suppiy. inter-country inequality in meeting basic needs appears much smaller than income inequality. WhJe inter-country income disparity increased, inequality in basic needs indicators declined during 1960-
1978.
1. htroduction
In the recent literature on economic development, an increased focus on the provision of ‘basic needs’ is evident. Indeed, meeting these needs is regarded as a major component of the development process. The publication by the World Bank of a series of monographs [e.g., World Bank (1980a)] on basic needs appears to reflect well the enhanced concern for poverty and the provision of basic needs throughout the less developed world. Several important questions can be asked in regard to the new emphasis on basic needs. Some of these relate to the possible interactions between growth of income and the provision of basic needs. Hrcks (1979) and Wheeler (1980), among others, have dealt with those questions. This note addresses the set of questions that pertain to the progress made in the provision of basic needs during the last about two decades, and the magnitude of the task ahead. Of course, the situation varies from country to country and intra-country studies are obviously relevant. However, an overall, cross-national perspective is useful in provideing a general comprehension and a broad sense of direction. Hicks and Streeten ( 1979, pp. 577578), who recently discussed this aspect, also felt that basic needs indicators would be a useful guide to the relative ‘gap’ between rich and poor countries, and should shed interesting lig t on the speed with which the gap was widening or narrowing. One procedure for obtaining such a perspective is to compute intercountry inequality indexes in respect of the major bas c needs indicators md to compare these across time and with similar indexes of income inequality. This paper presents some such indexes. *I
am thankful to an anonymous referee of this Journal for helpful comments on an earlier version aper. The responsibility for all errors and deficiencies is entirely mine.
/$02.75 (Q 1982 North-Holland
114
R. Ram, lnternatinnal ineqnulity
2. Inequality measure, data, and the results
For obaaining an index of crlass-country inequality in regard to any variable. one can choose from a fairly wide variety of formulations. The measure chosen for this study is simple and has several desirable properties. It is the measure L of Bourguignon (1979), which is the natural log of the ratio of arithmetic and geometric means, i.e.,
where L is the inequality index, and A and G are respectively the itrithmetic and the geometric means of the variable. Bourguignon (1979) has arg:led that this is the only population-weighted, additively decomposable inequality measure that satisfies th:: Pigou-Dalton condition and has the property of zero-homogeneity. fin fact, L is the same as Theil’s population-weighted inequality index which has bc>enused in several studies [e.g., Theil(l979) and Ram (1980)]. Therefore, one can regard (1) as a representation of either Bourguignon’s L or Theil‘s population-weighted inequality index. The inequality indexes are computed for the years 1960 and 1978 (or a year close to that) in respect of the five basic needs indicators included in World Bank ( 1980a),namely, adult literacy rate, life expectancy at birth, number of physicians per thousand population, daily calorie supply (as percent of the amount requiredj, and percentage of population having ar*cess to safe water.’ For computing the inequality indexes, population weights are used to calculate the arithme,iic and geometric means of each indicator.2 For making the relevant cornparsons, similar inequality indexes are also computed for per capita GNP in do!lars based OTPthe market exchange rates (‘nominal’ GNP), and that based on PPP exchange rates (‘real’ GNP) by using the exchange rate deviation index of Kravis et al. ( 1978).3Data for 1978 (or a similar recent year) are taken from World Bank (I 980a); those for 1960 are from World Bank ( 1980b) in respect of the basic needs indicators, from World Bank (197 1)in respect of per capita GNP, and from LJ.N.(1979)for population.4 Data for safe water access for the year 1960 are not available for any sizable country sample. The total number of countries included ‘Obviously, these are not the only indic:l+orsof basic needs; but these do seem to be among the principal measures of the provision 01 buch neelds. ‘That weighting by total population is fairly appropriate is evident from the nature of the indiccttors included, except in respect of the adult literacy rates for which weighting is done by the size of the ‘adult’population (aged 19-64) in each country. Note that life expectancy at birth can be regarded as the average age of the population, 3Extrapolat’lon of the exchange rate deviation index of Kravis et al. for the year 1970to such distant periods as 1960 and 1978is nDt unobjectionable; but there are no other similar indexes available for 1960 or 197%. ‘?o make the indexes more realistic, two data adjustments were made. For 1978,safewater access in industriahed countries is treated as 1000//6 wherever this information is missing. Second, the adult literacy rate for the industrialized countries tbr I960 is taken as 99% for all cases where this is missing. Actually, th: inequality indexes turn out to be fairly similar whether the adjustment is made or not.
R. Ram, International
irzequality
115
is 101; but data availa5ility, and thus the sample size, varies across different indexes. Table 1 presents the computed inequality indexes. Two facts stand out quite clearly. First, except in the case of physician supply, intercountry inequality in basic needs is much smaller than income inequality even when one considers the PPP income. While one might expect cross-country inequality to be less acute in regard to the provision of ‘basic needs’ than in measured income, it is instructive to observe the very low inequality indexes in respect of such measures as daily calorie supply, which is perhaps a prime indicator of nutrition, and life expectancy, which is widely believed to be an important health indicator. The intercountry inequality index for calorie intake is close to zero for both 1960 and 1978. The inequality index in respect of life expectancy is also very low even for 1960, and is. of course, lower for 1978. For both adult literacy and safe water access the indexes have a modest value of around 0.2. It is only the inequality in physician supply that is large and exceeds the inequality in per capita income.” Second, while income inequality across countries has increased, inequality ir. the provision of basic needs has declined perceptibly in respect of literacy, life Table I
Inter-country
inequality index (LBfor income and some basic-needs indicators: indicates number of countries in the sample).
___-~
--. -
--.
-__
-___-.
1960
1960 and 1978 (‘N =’
-__II_____-
1978 ----__.
(1) ‘Nominal’ per capita GNP (in U.S. dollars)
0.86 (II = 95)
1.12 (N = 100)
(2) ‘Real’ per capita GNP
0.45 (N = 89)
(N =94)
0.69
(3)
Adult literacy rate
0.223 (N = 89)
0.145 (N =90)
(4)
Life expectancy at birth
0.028 (N = 101)
0.016 (N = 101)
(5)
Number of physicians per thousand population
1.23 (N ~94)
(N -94)
(6)
Daily calorie intake (as percentage of the amount required)
0.0 I (N = 101)
0.0 I (N=lOl)
(7)
Percentage of population having access to safe water . ___“_____
1.12
0.2 I (N-85)
“As an anonymous referee rightly pointed out, the observed differences in inerlualitu may in par1 I-V a reflection of different income elasticities which, for example, could be higher for professionu I medlc;ll care than for ‘necessities’ like food. The large value of the inequality index in regard !o ~II~\IC’I‘III supply could also suggest, to some extent, inappropriateness of th e indicator as a meawre of III\availability of medical care in LDCs.
116
R. Ram, international inequality
expectancy and physician ~upply.~ The inequality index for calorie intake was close to zero even in 1960 and hence could not decline much. Safe water access has probably become less unequal even though data for 1960 are not available. Thus, it seems fair to say that, during the last two decades, cross-country income inequality and inelquality in the fulfillment of basic needs have changed significantly but in opposite directions, the former increasing while the latter declined. 7
3. Concluding remarks It is interesting to reflect a little on some of the implications of the aspects revealed by this study. Two related conclusions appear to follow. First, basic needs indicators do seem to be useful supplements to the income measures. Second, however, when these indicators are considered, the popular perception of international inequality changes dramatically: in general, not only does the inequality appear small, and not large, but declining and not increasing. Thus, the exercise indicates both the usefulness and the limitation of using basic needs indicators for cross-national comparisons. One learns that an exclusive focus on income can be misleading; the picture based on income alone indicates a large and growing inequality and tends to generate a sense of pessimism or even hopelessness. On the other hand, an undue stress on basic needs indicators is also hazard.ous; it could lead one into the belief that there is very little inter-country inequality, and that, therefore, not much really needs to be done in regard to international disparities. Income and basic needs measures seem to be truly complementary in studies of economic development. ‘Increase in inter-country income inequality is fairly well-known and documented. See, for example, Ram (1980). Note the income inequality indexes for 1960 given in table 1 differ somewhat from tholse given in Ram (1980), presumably due to the different base years used; but the broad magnitude of the indexes is similar in the two cases. ‘It is useful to remember that a substantial part of the ineouality represented in table 1 may bc LDC-DC inter-group inequality, and there is no necessary imphcation that the basic needs indicatorh and per capita income are not correlated within the LDC group.
References Bourguignon, Francois, 1979, L composable income inequality measures, Econometrica 47, 901920. Hicks, No:rman L., 1979, Growth vs basic needs: Is there a trade-off, World Development 7,985--994. Hicks, Norman L. and Paul Streeten, 1979, Indicators oi development: The search for a basic needs yardstick, World Development 7, 567-580. Kravis, LEI., A.W. Weston and R. Summers, 1978, Real GDP per capita for more than one hundred countries, Economic Journal 88, 215-242. Ram, R., 1980, Physical quality of life index and inter-country inequality, Economics Letters 5, f95199. TM, J-J., 1979, World income inequality and its componen!;, Economics Letters 2,99-102. United Nations, 1979, World population trends ;_nd policies, Vol. 1 (New York).
R. Ram, lrlternational
inequality
Wheeler, David, 1980, Basic needs fulfillment ar.d economic growth: A simultaneous of Development Economics 7,435-45 1. World Bank, 1971, World tables 1971 (Washington, DC). World Bank, 19SOa, Meeting basic needs: An overview (Washington, DC). World Bank, 198Ob, World development report 1980 (Washington, DC).
117 madeI, Journal
10 (1982) 113-l 17. North-Holland
I
Publishing
Compaq
ALITY IN CATORS
Rati RAM* Il”ashington State iJniwrsity,
Pullman,
WA 99164. USA
Received March 1981, final version received May 198 I data for nearly 100 countries, cross-country inequality indexes for five major ‘basic needs’ indicators are computed and compared with income inequality indexes. Except for physician suppiy. inter-country inequality in meeting basic needs appears much smaller than income inequality. WhJe inter-country income disparity increased, inequality in basic needs indicators declined during 1960-
1978.
1. htroduction
In the recent literature on economic development, an increased focus on the provision of ‘basic needs’ is evident. Indeed, meeting these needs is regarded as a major component of the development process. The publication by the World Bank of a series of monographs [e.g., World Bank (1980a)] on basic needs appears to reflect well the enhanced concern for poverty and the provision of basic needs throughout the less developed world. Several important questions can be asked in regard to the new emphasis on basic needs. Some of these relate to the possible interactions between growth of income and the provision of basic needs. Hrcks (1979) and Wheeler (1980), among others, have dealt with those questions. This note addresses the set of questions that pertain to the progress made in the provision of basic needs during the last about two decades, and the magnitude of the task ahead. Of course, the situation varies from country to country and intra-country studies are obviously relevant. However, an overall, cross-national perspective is useful in provideing a general comprehension and a broad sense of direction. Hicks and Streeten ( 1979, pp. 577578), who recently discussed this aspect, also felt that basic needs indicators would be a useful guide to the relative ‘gap’ between rich and poor countries, and should shed interesting lig t on the speed with which the gap was widening or narrowing. One procedure for obtaining such a perspective is to compute intercountry inequality indexes in respect of the major bas c needs indicators md to compare these across time and with similar indexes of income inequality. This paper presents some such indexes. *I
am thankful to an anonymous referee of this Journal for helpful comments on an earlier version aper. The responsibility for all errors and deficiencies is entirely mine.
/$02.75 (Q 1982 North-Holland
114
R. Ram, lnternatinnal ineqnulity
2. Inequality measure, data, and the results
For obaaining an index of crlass-country inequality in regard to any variable. one can choose from a fairly wide variety of formulations. The measure chosen for this study is simple and has several desirable properties. It is the measure L of Bourguignon (1979), which is the natural log of the ratio of arithmetic and geometric means, i.e.,
where L is the inequality index, and A and G are respectively the itrithmetic and the geometric means of the variable. Bourguignon (1979) has arg:led that this is the only population-weighted, additively decomposable inequality measure that satisfies th:: Pigou-Dalton condition and has the property of zero-homogeneity. fin fact, L is the same as Theil’s population-weighted inequality index which has bc>enused in several studies [e.g., Theil(l979) and Ram (1980)]. Therefore, one can regard (1) as a representation of either Bourguignon’s L or Theil‘s population-weighted inequality index. The inequality indexes are computed for the years 1960 and 1978 (or a year close to that) in respect of the five basic needs indicators included in World Bank ( 1980a),namely, adult literacy rate, life expectancy at birth, number of physicians per thousand population, daily calorie supply (as percent of the amount requiredj, and percentage of population having ar*cess to safe water.’ For computing the inequality indexes, population weights are used to calculate the arithme,iic and geometric means of each indicator.2 For making the relevant cornparsons, similar inequality indexes are also computed for per capita GNP in do!lars based OTPthe market exchange rates (‘nominal’ GNP), and that based on PPP exchange rates (‘real’ GNP) by using the exchange rate deviation index of Kravis et al. ( 1978).3Data for 1978 (or a similar recent year) are taken from World Bank (I 980a); those for 1960 are from World Bank ( 1980b) in respect of the basic needs indicators, from World Bank (197 1)in respect of per capita GNP, and from LJ.N.(1979)for population.4 Data for safe water access for the year 1960 are not available for any sizable country sample. The total number of countries included ‘Obviously, these are not the only indic:l+orsof basic needs; but these do seem to be among the principal measures of the provision 01 buch neelds. ‘That weighting by total population is fairly appropriate is evident from the nature of the indiccttors included, except in respect of the adult literacy rates for which weighting is done by the size of the ‘adult’population (aged 19-64) in each country. Note that life expectancy at birth can be regarded as the average age of the population, 3Extrapolat’lon of the exchange rate deviation index of Kravis et al. for the year 1970to such distant periods as 1960 and 1978is nDt unobjectionable; but there are no other similar indexes available for 1960 or 197%. ‘?o make the indexes more realistic, two data adjustments were made. For 1978,safewater access in industriahed countries is treated as 1000//6 wherever this information is missing. Second, the adult literacy rate for the industrialized countries tbr I960 is taken as 99% for all cases where this is missing. Actually, th: inequality indexes turn out to be fairly similar whether the adjustment is made or not.
R. Ram, International
irzequality
115
is 101; but data availa5ility, and thus the sample size, varies across different indexes. Table 1 presents the computed inequality indexes. Two facts stand out quite clearly. First, except in the case of physician supply, intercountry inequality in basic needs is much smaller than income inequality even when one considers the PPP income. While one might expect cross-country inequality to be less acute in regard to the provision of ‘basic needs’ than in measured income, it is instructive to observe the very low inequality indexes in respect of such measures as daily calorie supply, which is perhaps a prime indicator of nutrition, and life expectancy, which is widely believed to be an important health indicator. The intercountry inequality index for calorie intake is close to zero for both 1960 and 1978. The inequality index in respect of life expectancy is also very low even for 1960, and is. of course, lower for 1978. For both adult literacy and safe water access the indexes have a modest value of around 0.2. It is only the inequality in physician supply that is large and exceeds the inequality in per capita income.” Second, while income inequality across countries has increased, inequality ir. the provision of basic needs has declined perceptibly in respect of literacy, life Table I
Inter-country
inequality index (LBfor income and some basic-needs indicators: indicates number of countries in the sample).
___-~
--. -
--.
-__
-___-.
1960
1960 and 1978 (‘N =’
-__II_____-
1978 ----__.
(1) ‘Nominal’ per capita GNP (in U.S. dollars)
0.86 (II = 95)
1.12 (N = 100)
(2) ‘Real’ per capita GNP
0.45 (N = 89)
(N =94)
0.69
(3)
Adult literacy rate
0.223 (N = 89)
0.145 (N =90)
(4)
Life expectancy at birth
0.028 (N = 101)
0.016 (N = 101)
(5)
Number of physicians per thousand population
1.23 (N ~94)
(N -94)
(6)
Daily calorie intake (as percentage of the amount required)
0.0 I (N = 101)
0.0 I (N=lOl)
(7)
Percentage of population having access to safe water . ___“_____
1.12
0.2 I (N-85)
“As an anonymous referee rightly pointed out, the observed differences in inerlualitu may in par1 I-V a reflection of different income elasticities which, for example, could be higher for professionu I medlc;ll care than for ‘necessities’ like food. The large value of the inequality index in regard !o ~II~\IC’I‘III supply could also suggest, to some extent, inappropriateness of th e indicator as a meawre of III\availability of medical care in LDCs.
116
R. Ram, international inequality
expectancy and physician ~upply.~ The inequality index for calorie intake was close to zero even in 1960 and hence could not decline much. Safe water access has probably become less unequal even though data for 1960 are not available. Thus, it seems fair to say that, during the last two decades, cross-country income inequality and inelquality in the fulfillment of basic needs have changed significantly but in opposite directions, the former increasing while the latter declined. 7
3. Concluding remarks It is interesting to reflect a little on some of the implications of the aspects revealed by this study. Two related conclusions appear to follow. First, basic needs indicators do seem to be useful supplements to the income measures. Second, however, when these indicators are considered, the popular perception of international inequality changes dramatically: in general, not only does the inequality appear small, and not large, but declining and not increasing. Thus, the exercise indicates both the usefulness and the limitation of using basic needs indicators for cross-national comparisons. One learns that an exclusive focus on income can be misleading; the picture based on income alone indicates a large and growing inequality and tends to generate a sense of pessimism or even hopelessness. On the other hand, an undue stress on basic needs indicators is also hazard.ous; it could lead one into the belief that there is very little inter-country inequality, and that, therefore, not much really needs to be done in regard to international disparities. Income and basic needs measures seem to be truly complementary in studies of economic development. ‘Increase in inter-country income inequality is fairly well-known and documented. See, for example, Ram (1980). Note the income inequality indexes for 1960 given in table 1 differ somewhat from tholse given in Ram (1980), presumably due to the different base years used; but the broad magnitude of the indexes is similar in the two cases. ‘It is useful to remember that a substantial part of the ineouality represented in table 1 may bc LDC-DC inter-group inequality, and there is no necessary imphcation that the basic needs indicatorh and per capita income are not correlated within the LDC group.
References Bourguignon, Francois, 1979, L composable income inequality measures, Econometrica 47, 901920. Hicks, No:rman L., 1979, Growth vs basic needs: Is there a trade-off, World Development 7,985--994. Hicks, Norman L. and Paul Streeten, 1979, Indicators oi development: The search for a basic needs yardstick, World Development 7, 567-580. Kravis, LEI., A.W. Weston and R. Summers, 1978, Real GDP per capita for more than one hundred countries, Economic Journal 88, 215-242. Ram, R., 1980, Physical quality of life index and inter-country inequality, Economics Letters 5, f95199. TM, J-J., 1979, World income inequality and its componen!;, Economics Letters 2,99-102. United Nations, 1979, World population trends ;_nd policies, Vol. 1 (New York).
R. Ram, lrlternational
inequality
Wheeler, David, 1980, Basic needs fulfillment ar.d economic growth: A simultaneous of Development Economics 7,435-45 1. World Bank, 1971, World tables 1971 (Washington, DC). World Bank, 19SOa, Meeting basic needs: An overview (Washington, DC). World Bank, 198Ob, World development report 1980 (Washington, DC).
117 madeI, Journal