Publications  Income Distribution

11. Conclusions and implications. There is enormous variance in income distribution at all levels of income. Even if one leaves out extreme values, of doubtful reliability, the share of the poorest 40% in LDCs ranges between 6% and 23% and the GINI between 0.2 and 0.55. Very little of this variance is explained by the Kuznets curve: as per capita income rises from $100 to $400 the maximum deterioration in SHARE is 1.3% as a result of the Kuznets effect. The change in GINI is even smaller in percentage terms. 

Table 3 brings some evidence that the Kuznets effect may not hold for SHARE and table 2 indicates that the intensity of the Kuznets effect, however measured, may be declining. Each of the two variables under government control has about the same effect on income distribution as the maximum predicted effect of the Kuznets curve. A 30% change in educational participation and in the share of primary exports in GDP, in combination increase the predicted SHARE from 12% to 16% while the maximum change due to the Kuznets effect is 1.3%. 


Contrary to expectations, the share of manufactured exports in GDP does not significantly affect income distribution. A dualistic socio-political structure is highly correlated with an unequal income distribution. Neither the rate of growth, nor government intervention are related to income distribution. 

Regardless of socio-political systems, policies or economic structure, the absolute income of the poor triples or quadruples as per capita income moves from $100 to $400, even on the most pessimistic assumptions about the importance of the Kuznets effect. On the whole development has been highly favorable for the absolute income of the poor. There is no clear trade-off between a higher rate of growth and greater government intervention on the one hand and a more equitable distribution of income on the other. More rapid growth therefore contributes to the more rapid alleviation of poverty. These are far more optimistic inferences about reconciling growth and equity than those of other analysts [e.g., Adelman (1975)].










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