Thursday, September 29, 2011

Growth Good for Poorest Nigerians

In preparation for my development economics class tonight, I sat down with my Gapminder data for Nigeria and examined how the distribution of income has changed in Nigeria between 1986 and 2004.

From 1986 to 1996 - to no one's great surprise - income inequality increased dramatically. The richest 10% of the population gained 7% more of the income while everyone else lost income share. Since there was very little economic growth at the time, it would be fair to say at least that the richest got richer and some people got poorer.

In 1996, however, things began to turn around in inequality terms, and for
the poorest 20% of the population that turn around happened in 1992. Even before democratic elections were restored, before the latest, long, stable run of economic growth started, income inequality has been on the decline. In the jargon, any Lorenz-consistent measure will agree that there is less inequality in 2004 than there was in 1996.

From 1996 to 2004, the richest 10%'s share of income has decreased, and everyone else's has increased. The poorest 20% gained income share from 1992-1996, but have remained steady since then.

From 1996 to 2004, per capita income increased a total of 11% in PPP terms. The income of the poorest 20% similarly went up 11%. The income of the middle 70% (20th percentile to 90th) increased by more than 11% in all groups. The income of the richest 10% went up by less than 11%.

Nigeria's last decade and a half of growth has been good for the poor and good for the middle class.

(In the graph, the top dark line shows the distribution in 1986; the bottom dark line shows the distribution 1996; the blue pencil line in the middle shows 2004. The straight line shows what the distribution would look like if we had perfect income equality.)

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