Recent years have witnessed increased polarization in income levels both among countries and among various income groups and classes within countries. Rapid and steady growth in developing countries is clearly necessary to close their income gap with the advanced industrial countries and improve standards of living. There may be some scope for raising income through reallocation of existing resources, but restoring rapid growth depends in large part on raising the rate of capital accumulation.
Experience shows that while rapid growth as such may not lead to a significant improvement in income distribution in the short to medium term, it is indispensable for attaining a more balanced pattern of distribution in the longer term. More importantly, policies can be designed so as to strengthen the forces making for greater equality while promoting growth and absorbing the surplus labor that prevails in many developing countries.
The ability of market mechanisms and locally-based initiatives to provide for the economic well-being of those persons at the low end of the income distribution is questionable. In practice, much of the concern for distributional issues is lost in the transition from an academic or policy discussion to the implementation of local economic development programs (Leigh 1995). ...Show more