As normally measured, “global inequality” is the relative inequality of incomes found among all people in the world no matter where they live. Francois Bourguignon and Branko Milanovic have written insightful and timely books on global inequality, emphasizing the role of globalization. The books are complementary: Milanovic provides an ambitious broad-brush picture, with some intriguing hypotheses on the processes at work; Bourguignon provides a deep and suitably qualified economic analysis. This paper questions the thesis of both books—that globalization has been a major driving force of inequality between or within countries. The paper also questions the robustness of the evidence for declining global inequality, and notes some conceptual limitations of standard measures in capturing the concerns of many observers in the ongoing debates about globalization and the policy responses. ( JEL D31, D63, E25, F61, F63)

Abhijit Banerjee and Esther Duflo offer a coherent vision for an economics of poverty and antipoverty policy. Their economics is grounded in an effort to understand the economic and psychological complexities in the lives of poor people, informed by social experiments and field observations. Their preferred policies entail small reforms at the margin, also informed by experiments—specifically randomized control trials. While the book provides some interesting insights, I question how far its approach will get us in fighting global poverty. (JEL I32, I38, O15, P36)

In a cross-country data set for developing and transitional economies, private consumption per capita from the national accounts deviates on average from mean household income or expenditure based on national sample surveys. Growth rates also differ systematically, so that the ratio of the survey mean to mean consumption from the national accounts tends to fall over time. The exceptions to these general findings are revealing, however. There are strong regional effects. The aggregate difference in the levels is due more to income surveys than to expenditure surveys. Divergence over time is mainly due to the severe data problems in the (contracting) transition economies. © 2003 President and Fellows of Harvard College and the Massachusetts Institute of Technology.

Average living standards are converging among developing countries and faster growing economies see more progress against poverty. Yet we do not find poverty convergence; countries starting with higher poverty rates do not see higher proportionate rates of poverty reduction. The paper tries to explain why. Analysis of a new dataset suggests that, at given mean consumption, high initial poverty has an adverse effect on consumption growth and also makes growth less poverty-reducing. Thus, for many poor countries, the growth advantage of starting out with a low mean is lost due to a high incidence of poverty. JEL: D63, I31, I32, O15

THE PROTECTION OF POOR HOUSEHOLDS in high-risk agrarian economies from shocks to their incomes has often been seen as a compelling motive for various forms of policy intervention including transfers of cash or food, credit subsidies, and public employment schemes (for a survey see Lipton and Ravallion (1995)). The desirability of such safety net policies clearly depends on how well pre-existing risk-sharing arrangements work. While it is commonly thought that, without effective policy intervention, rural households are vulnerable to village-wide shocks such as adverse prices or poor rains, it is less clear to what extent risk-sharing institutions within the village mitigate the effects of idiosyncratic income risk stemming, for instance, from ill-health or localized crop damage.2 Several recent papers have used household-level data to implement tests of risk-sharing that might inform such concerns.3 These tests are based on the proposition that with perfect risk-sharing, consumption at the household level should be insured against idiosyncratic risks and thus depend solely on the realization of the aggregate risk (Wilson (1968); Diamond (1967)). Townsend (1994) tests this implication of perfect intra-village risk-sharing using longitudinal household data on consumptions and incomes for three villages in India. He reports that the full-insurance hypothesis provides a surprisingly good benchmark in that household consumptions co-move and do not appear to be much influenced by contemporaneous own income. Our aim here is to examine the robustness of this potentially important finding. We have two main concerns. The first is that the specification Townsend adopts potentially biases his test towards the null hypothesis of full insurance because it yields inconsistent estimates of the key test parameter under a plausible alternative. We therefore estimate a different specification that generates consistent estimates under both the null and the alternative. Our second concern is that a particular form of measurement error in the consumption data Townsend uses may have further biased his results toward the null hypothesis of full-insurance. To address this concern, we use an instrumental variables procedure when we implement the test of consumption insurance with Townsend's consumption data. We also re-estimate the test equations with a measure of consumption derived from the same underlying primary data by an alternate method. Finally, Townsend reports 1Discussions with Robert Townsend stimulated our interest in this investigation. The staff of the

Casual observations and the best data available indicate remarkable geographic differences in levels of living within China. What creates China's poor areas? Are they catching up? What should governments do? The paper provides an overview of recent research addressing these questions. There is evidence of sizable negative externalities to households of living in a poor area. Location matters greatly to growth prospects at the farm household level independently of (observed and unobserved) household characteristics. Geographic poverty traps are common. There also appears to be a high degree of transient poverty associated with poorly developed risk markets. The paper argues that poor-area programs make sense in China, given that where you live constrains prospects of escaping poverty, including by out-migration. However, such programs alone are unlikely to solve China's poverty problem. A comprehensive strategy for doing so will also help protect poor people from the risks they face, and should not neglect poor people in non-poor areas.

Prevailing measures of relative poverty are unchanged when all incomes grow or contract by the same proportion. This property stems from seemingly implausible assumptions about the disutility of relative deprivation and the cost of social inclusion. We propose “weakly relative” lines that relax these assumptions. On calibrating our measures to national poverty lines and survey data, we find that half the population of the developing world in 2005 lived in poverty, only half of whom were absolutely poor. The total number of poor rose over 1981 to 2005 despite falling numbers of absolutely poor. With sustained economic growth, the incidence of relative poverty became less responsive to further growth. The number of relatively poor rose, just as the numbers of absolutely poor fell.