Income inequality indicates how material resources are distributed across society. Some consider high levels of income inequality to be morally undesirable. Others believe that income inequality is bad because it causes conflict, limits co-operation or creates psychological and ultimately physical stresses. Often the policy concern is more for the direction of changes in inequality, rather than for its level.
Keeping measurement-related differences in mind, income inequality is high in the Asia/Pacific region compared to the OECD (Figure 5.4). In 2016, income inequalities were widest in Malaysia and China with Gini coefficients on income inequality at above 0.40, compared to around 0.25 in Kazakhstan and the Kyrgyz Republic. Over the past decade, income inequality across the Asia/Pacific economies remained around 0.35, which is above the OECD average (0.32). Some Asia/Pacific countries like the Fiji, the Kyrgyz Republic, Mongolia and Thailand experienced a reduction in income inequality over the past 10 years, while significant increases in income inequality were recorded in Armenia and Sri Lanka.
The gap between the average income and consumption of the richest and the poorest 10% of the population is similar in the Asia/Pacific economies and the OECD countries (Figure 5.5). The gap appears widest in Malaysia, and smallest in Kazakhstan and the Kyrgyz Republic. During the past decade, the gap declined in Bhutan, China, Fiji, Kazakhstan, the Kyrgyz Republic, Mongolia, and Thailand while it increased in Armenia, Lao PDR, Pakistan, Sri Lanka, Tajikistan and Viet Nam.
The relationship between income inequality and economic growth has stimulated much theoretical and empirical research over the past decades. But no consensus on the strength or even the sign of the inequality-growth nexus has yet been reached. There does not appear to be a clear country-correlation between economic growth and changes in inequalities among Asia/Pacific countries (Figure 5.6).
