Income Inequality and Economic Development

Although good theoretical reasons exist for expecting development to be inegalitarian in its early phase, a reverse-U pattern of change in measured inequality might just as easily derive from a statistical composition effect. That such a pattern occurs in reality, however, is far from certain, and all authors agree on governments' ability to keep inequality in check, if they so desire. The effects of redistribution on income and employment do not seem to be appreciable. All empirical studies, including those offering elaborate models of less developed economies, suffer from the inadequacy of historical data, as well as from unresolved problems in definition, methodology, and measurement. Most authors, but not all, would subscribe to the statement that absolute poverty (which should cause more concern than, and should not be confused with, relative inequality) is reduced by economic development.