Does market-led development breed inequality?
Forty years ago Simon Kuznets suggested there was a negative relationship between growth and income equality in the early stages of development, and for a long time that proposition went unchallenged. Partly as a result, the belief persisted that growth with equity was impossible — and that development and poverty reduction could often be at odds. Time, and a mountain of empirical evidence has given ever weaker support for these claims. First — as Klaus Deininger and Lyn Squire have shown in recent work at the World Bank — more rigorous empirics and better data, covering 91countries over more than 30 years, suggests scant evidence of a Kuznets-type rise in inequality over the early stages of growth. Indeed, periods of rapid growth have come with a rise in income equality at least as often as a decline. Second, we have seen enormous reductions in poverty as a result of rapid growth. Consider Japan, or the “Asia Tigers”, or China and Vietnam — all cases in which many millions were li
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