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Changing Perspectives on Inequality and Development

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Abstract

The paper considers how thinking on inequality in relation to development has evolved over the last half century, including three critical questions: why be concerned about inequality; inequality of what; and among whom. Fifty years ago, inequality was defined unidimensionally in terms of incomes, with a focus on inequality among individuals, and it was regarded purely instrumentally, as a means to achieve higher economic growth. Since then, the objectives of development have widened while the extent of inequality is increasingly regarded as important in itself, for justice, as well as instrumentally. Exploration of inequality and its effects now extends to a plurality of dimensions. Consideration of inequality among whom has also broadened, beyond inequality among individuals (vertical inequality), to concern with inequality among groups (horizontal inequality) both in relation to justice and instrumentally. Evidence suggests that greater horizontal equality tends to reduce violent conflict, and greater vertical equality to reduce criminality, while both are likely to improve social outcomes and promote sustainable growth. The paper argues that although the objective of achieving more equality is increasingly accepted, many countries are experiencing more inequality and few effective redistributive measures have been adopted. It reviews how political economy considerations explain this paradox.

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Notes

  1. See Stewart (2013) for elaboration of other philosophers’ views.

  2. See also Birdsall et al. (1995); Bourguignon (1995); Deininger and Squire (1998).

  3. Multiple regression for 115 countries (including developed) shows a relationship between IMR and income per capita but no relationship with inequality: IMR = 40.69 − 0.00132y(−6.969) + 0.118g(0.474) (adjusted r-square = 0.313), where y = income per head (PPP), g = Gini coefficient, and bracketed figures are T values.

  4. Lakner and Milanovic (2013) adjust household survey data for underreporting of high incomes by using national accounts, yet this may still understate very high incomes and possibly very low ones as well.

  5. Among OECD countries, reductions in the Gini measure of inequality due to taxes and transfers vary from 0.15 in the USA to 0.25 in Ireland. Reductions among developing countries are generally much less: −0.06 in South Korea, for example. However, public expenditure on basic services is redistributive in developing (and developed) countries (Cornia 2004).

  6. The Palma ratio is the ratio of the income share of the top 10 % to the bottom 40 %; a Palma v.2 has been suggested as the ratio of the top 5 % to the bottom 40 %; and Palma v.3 is the ratio of the top 1 % to the bottom 40 % (WIDER Research Brief 7/15).

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Acknowledgments

I am very grateful for comments on an earlier draft of this paper from Peter Evans and participants at the Workshop “50 Years of Comparative International Development: Reflecting on Changes in the Field,” Watson Institute for International Studies, October 30, 2015.

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    Frances Stewart

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Stewart, F. Changing Perspectives on Inequality and Development. St Comp Int Dev 51, 60–80 (2016). https://doi.org/10.1007/s12116-016-9222-x

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