Growth and Wage Inequality in a Dual Economy

Who benefits from economic growth? This paper analyses the distributional impact of different types of growth within a two‐sector model. The paper first presents necessary and sufficient conditions for unambiguous changes in wage inequality in a dual economy, based on analysis of the entire Lorenz c...

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Bibliographic Details
Published in:Bulletin of economic research 2005-04, Vol.57 (2), p.145-169
Main Author: Temple, Jonathan R. W.
Format: Article
Language:English
Subjects:
Capital accumulation
D30
dualism
Earnings
Economic development
Economic growth
Economic impact
growth
Growth theory
Income distribution
Income inequality
Inequality
Modelling
National income
O15
Poverty
Studies
Technological change
Wage differential
Wages
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Summary:Who benefits from economic growth? This paper analyses the distributional impact of different types of growth within a two‐sector model. The paper first presents necessary and sufficient conditions for unambiguous changes in wage inequality in a dual economy, based on analysis of the entire Lorenz curve. These conditions are then applied to the Harris–Todaro model with an urban non‐agricultural sector and rural agriculture. It is shown that capital accumulation or technical progress in agriculture can shift the Lorenz curve inwards and reduce wage inequality, while the effects of development in non‐agriculture are typically ambiguous.
ISSN:0307-3378
1467-8586
DOI:10.1111/j.0307-3378.2005.00218.x