Scandinavian Working Papers in Economics

Comparative Institutional Analysis Working Paper Series,
Lund University, Comparative Institutional Analysis, School of Economics and Management

No 2013:1: The inequality possibility frontier: the extensions and new applications

Branko Milanovic
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Branko Milanovic: Development Research Group, World Bank

Abstract: The paper extends the Inequality Possibility Frontier (IPF) approach introduced by Milanovic, Lindert and Williamson (2011) in two methodological directions. It allows the social minimum to increase with the average income of a society, and it derives all the IPF statistics for two other inequality measures than the Gini. Finally, it applies the framework to contemporary data showing that the inequality extraction ratio can be used in the empirical analysis of post-1960 civil conflict around the world. The duration of conflict and the casualty rate are positively associated with the inequality extraction ratio, that is, with the extent to which elite pushes the actual inequality closer to its maximum level. Inequality, albeit slightly reformulated, is thus shown to play a role in explaining civil conflict.

Keywords: inequality; inequality possibility frontier; civil war

JEL-codes: D31; N30; O10; Q30

30 pages, May 1, 2013

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