Global Income Polarization: Relative and AbsolutePerspectives

This paper presents the first estimates of global and regional income polarizationtrends from 1960 to 2020. Our analysis relies on bipolarization indices and a polarizationmeasure (DER) that accounts for multiple poles in the income distribution.We employ both relative and absolute indexes, introducing a parametrization ofthe DER index that is simultaneously scale- and translation-invariant. Our findingsshow that while relative polarization has unambiguously declined since the 1980s,absolute polarization continues to rise, except at higher parameter values. Thesecontrasting trends are robust across various data selection methods and adjustmentsfor non-response among top incomes. Regionally, absolute polarization has increasedin North America and East Asia but decreased in Europe and Central Asia. Evidenceon inequality perceptions suggests that individuals often perceive polarizationin absolute terms. Policymakers are therefore encouraged to consider both relativeand absolute perspectives when developing strategies to address the complex natureof polarization. JEL Classification: D63, C15, C46