Income Distribution And Development

Date: Mar, 2000
ODID Working Paper No. 37
Author(s): Frances Stewart (QEH)

Income distribution is extremely important for development, since it influences the cohesion of society, determines the extent of poverty for any given average per capita income and the poverty-reducing effects of growth, and even affects people's health. The paper reviews the connections between income distribution and economic growth. It finds that the Kuznets hypothesis that income distribution worsens as levels of income increase is not at all strongly supported by the evidence, while growth rates of income are not systematically related to changes in income distribution. However, evidence is accumulating that more equal income distribution raises economic growth. Both political and economic explanations have been advanced. The finding suggests that more equal income distribution is desirable both for equity and for promoting growth.

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