Structural Change and Income Distribution in Developing Economies: Evidence from a Group of Asian and Latin American Countries

Ananya Ghosh Dastidar
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Ananya Ghosh Dastidar: Delhi School of Economics

No 121, Working papers from Centre for Development Economics, Delhi School of Economics

Abstract: In this paper we address the broad question, how does the process of industrial transformation, affect personal income distribution within a developing economy ? The starting point of our analysis is Kuznets (1955). What clearly emerges from Kuznets’s writings is that under certain circumstances, the process of industrialisation would have very clear-cut implications for changes in the distribution of income within the economy. In the first part of this paper we present our basic arguments regarding the relation between the process of structural change and the overall (personal) distribution of income within a developing economy. Thereafter we examine the evidence from a group of eighteen developing countries from Asia and Latin America as we try to ascertain the nature of empirical support for our hypothesis regarding the relation between structural change and income inequality. We find little support in the data for the Kuznetsian hypothesis of increasing inequality with the industrial transformation of a developing economy. Rather, an important point that emerges from our analysis is that the existence of an informal sector plays an important role in determining how inter-sectoral labour movements affect the overall distribution of income in the context of developing economies.

Keywords: Structural change; Income distribution; Informal Sector; Developing Countries. (search for similar items in EconPapers)
JEL-codes: O11 O15 O17 (search for similar items in EconPapers)
Pages: 44 pages
Date: 2004-02
New Economics Papers: this item is included in nep-cwa, nep-dev and nep-sea
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Citations: View citations in EconPapers (1)

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