World Income Distribution through History

There is an interesting paper in the new issue of the Business Review, published by the Federal Reserve Bank of Philadelphia. In it, economist Keith Sill examines The Evolution of World Income Distribution. In many ways, the paper I thought the paper is similar to Gregory Clark's A Farewell to Alms, reviewed here back in April.

The questions are why world income distribution (and by extension, living standards) are relatively equal and stable up to 1800, and why the regions diverge significantly after 1800. Sill uses data recently published by Angus Maddison in his book, Countours of the World Economy and a model by Nobel laureate Robert Lucas to try to find answers.

The early part of the paper provides some insights regarding the divergence mentioned above, but also hints at a fairly recent convergence - certainly due, in part, to the economic growth of large nations such as China and India. He also talks about how the income distribution can be seen as narrowing, if adjusted for population and income inequality within nations, rather than just comparing nations.

If I understand Sill correctly, current research on the topic points to a couple of key factors: the importance of human capital to economic development, and the value of technology as it is applied in an environment of increasing human capital. This first would seem to agree both with work by Lucas, as well as by Paul Romer as depicted in David Warsh's Knowledge and the Wealth of Nations. The second would seem to support one of the themes of a book in the popular press; Thomas Friedman's The World is Flat.

But what I found most interesting in Sill's conclusions is that data in various countries does not point to one recipe for making poor countries rich. The process is, as he points out, "a complex mixture of policies and institutions." But within this mix, he points out the secure property rights and a level playing field are helpful if an economy is to be successful.

I would be interested in your reading of Sill's article, and if possible any links you see to the books mentioned.