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Chapter 34: Income Distribution
34 Income distribution Rolph van der Hoeven Introduction Of the many issues central to the development process, few have been characterized by the shifts, reversals and re-affirmations that have plagued analysis of the interaction between economic growth and poverty and income distribution. Evidence of worsening income distribution and poverty in many countries, including some in the industrialized West, in the 1980s and 1990s has rekindled ever-smouldering controversies (Cornia 2004; van der Hoeven 2002). One reason for the analytical shifts is the suggestion that income inequality and hence income distribution should not be a concern as long as poverty or deprivation is on the decline. Others argue, however, that there are moral reasons to be concerned with inequality. Cullity (2004) mentioned four of these: ● ● ● ● Inequality could be construed as domination, imposing hardships on other groups. Inequality of political and legal status could be a consequence of income inequality. Inequality represents callousness, as others cannot meet their basic needs. Brute inequality stands for a society’s inability to include all groups in welfare enhancement. An economic argument against excessive income inequality, which we will develop further on, is that income inequality in various circumstances hampers economic growth, slows poverty reduction and sustains deprivation.1 Inequality and growth From the 1950s to the 1970s analyses emphasized the probable trade-offs between growth and income distribution. This derived in part from Kuznet’s famous ‘inverted-U hypothesis’, which postulated that inequality would rise in the initial phases of development, then decline after some crucial level was reached and hence...
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