Showing posts from May, 2015

Unpacking the drivers of inequality

The relationship between growth and income inequality is more complex than the one between growth and poverty, and has been the subject of considerable study.

An early contribution in the 1950s by Nobel Prize-winning economist Simon Kuznets, for instance, noted that at least two forces tended to increase inequality over time. One was the concentration of savings in the upper-income groups; he observed that in the United States the wealthiest 5 percent of the population accounted for close to two-thirds of total savings.
A second factor, which has been a universal characteristic of development over the past century, was the gradual shift away from agriculture. Between 1991 and 2001, for instance, more than 8 million people left agriculture in India. Between 1965 and 2000 the share of the labor force employed in agriculture fell from 49 to 21 percent in Brazil, from 26 to 5 percent in Japan, from 55 to 11 percent in Korea, from 81 to 47 percent in China, and it fell to 2 percent i…