A dollar must surely have been worth much more in 1970 due to inflation, does the data take that into account?
Yes, the data has been adjusted for inflation; all incomes are in fixed 1999 prices.
The living costs can differ quite a lot between countries if one uses
the exchange rates, does the data take that into account?
Yes, the data is based on the local purchasing power of the local
currency, not on the exchange rate value of the currency. Hence all the
incomes are in so-called fixed 1999 international prices.
What is the source for the data used in the graph?
The data is based on estimates in a background paper for the Human Development Report 2005:
Dikhanov, Yuri (2005). Trends in global income distribution, 1970-2000,
and scenarios for 2015. Human Development Report Office Occasional paper (download here )
