Structural Change and Income Inequality – Agricultural Development and Inter-sectoral Dualism in the Developing World, 1960-2010
Structural Change and Income Inequality – Agricultural Development and Inter-sectoral Dualism in the Developing World, 1960-2010
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Andersson, M.P. y Palacio Chaverra, A.F. 2016. Structural Change and Income Inequality – Agricultural Development and Inter-sectoral Dualism in the Developing World, 1960-2010. Oasis. 23 (jun. 2016), 99–122. DOI:https://doi.org/10.18601/16577558.n23.06.
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Structural change consists of the long-term changes in the sectoral composition of output and employment. We introduce a structural change perspective to the study of income inequality in 27 countries of the developing world for the period 1960-2010. The service sector has become the main employer, but the agricultural sector is central to the income distribution because poverty is mostly rural, and the labor surplus is high. We decompose the sectoral composition of aggregate labor productivity at the country level, divide the countries into agrarian, dual (beginner, intermediate and advanced), and mature economies and use the inter-sectoral productivity gap to test the effect of structural change on income inequality. We confirm increases in agricultural productivity everywhere and find that the inter-sectoral gap is positively associated with income inequality. The effect is negligible in agrarian and advanced economies but powerful in dual beginner economies: an increase of 1% in the inter-sectoral gap increases income inequality by 0.5%. The effect peters out in dual intermediate economies and disappears completely in dual advanced economies. Finally, redistribution has been the key to compensating the losers in the income changes, particularly for those entering the non-agricultural economy.
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Timmer, P. (2007). The structural transformation and the changing role of agriculture in economic development: empirics and implications. Wendt Lecture.
Tsounta, E. y Osueke, A. (2014). What is Behind Latin America’s Declining Income Inequality? International Monetary Fund (14/124).
UNCTAD (2012). Handbook of Statistics. Geneve: Switzerland: United Nations.
Vollrath, D. (2009). How important are dual economy effects for aggregate productivity? Journal of development economics, 88 (2), 325-334.
Alvaredo, F. & Gasparini, L. (2013). Recent trends in inequality and poverty in developing countries. Handbook of Income Distribution, 2, 697–805.
Banerjee, A., Duflo, E. & Qian, N. (2012). On the road: Access to transportation infrastructure and economic growth in China (No. w17897). National Bureau of Economic Research.
Bourguignon, F. (2011). A turning point in global inequality…and beyond. Annual Bank Conference of Development Economics, Papers and Proceedings.
Bourguignon, F. & Morrisson, C. (1998). Inequality and development: the role of dualism. Journal of Development Economics, 57 (2), 233-257.
Deininger, K., Jin, S., Xia, F. & Huang, J. (2014). Moving off the farm: land institutions to facilitate structural transformation and agricultural productivity growth in China. World Bank Policy Research Working Paper Series.
De Janvry, A. & Sadoulet, E. (2009). Agricultural growth and poverty reduction: Additional evidence. The World Bank Research Observer, 25 (1), 1-20.
Da Costa Araújo, D. T. (2012). Structural Change for equality: An integrated approach to development. Conyuntura internacional, 9 (5), 61-66.
FAO (2014). The state of food and agriculture. New York: Food & Agriculture Organization of the un.
Fei, J. C. & Ranis, G. (1966). Agrarianism, dualism and economic develpment. Underdevelopment to Developing Economies. In Adelman I. & Thorbecke, E. (eds.). The theory and design of economic development. Baltimore, md: John Hopkins University Press.
Fuglie, K. O., Wang, S. L. & Ball, V. E. (eds.) (2012). Productivity growth in agriculture: an international perspective. Washington, DC: CABI.
Ghani, E. & O’Connell, S. D. (2014). Can service be a growth escalator in low-income countries? World Bank Policy Research Working Paper (6971).
Gollin, D., Lagakos, D. & Waugh, M. E. (2013). The agricultural productivity gap (No. w19628). National Bureau of Economic Research.
International Monetary Fund (2015). April 2015 World Economic Outlook Database.
Kanbur, R. (2012). Does Kuznets still matter?. Policy-Making for Indian Planning: Essays on Contemporary Issues in Honor ofMontek S. Ahluwalia, Academic Foundation Press, 1 (1), 5-128.
Kanbur, R., Rhee, C. & Zhuang, J. (eds.) (2014). Inequality in Asia and the Pacific: Trends, drivers, and policy implications. New York: Routledge.
Karabarbounis, L. & Neiman, B. (2014). The Global Decline of the Labor Share. Quarterly Journal of Economics, 129 (1), 61-103.
Kuznets, S. (1955). Economic growth and income inequality. The American Economic Review, 45 (1), 1-28.
Kuznets S. (1965). Economic growth and structure: selected essays. New York: W.W. Norton & Company Kuznets, S. & Murphy, J. T. (1966). Modern economic growth: Rate, structure, and spread. New Haven: Yale University Press.
Lewis, W. A. (1954). Economic development with unlimited supplies of labour. The Manchester school, 22 (2), 139-191.
Lustig, N., Lopez-Calva, L. F. y Ortiz-Juarez, E. (2013). Declining inequality in Latin America in the 2000s: the cases of Argentina, Brazil, and Mexico. World Development, 44, 129-141.
Mazundar, D. (2010). Decreasing poverty and increasing inequality in India. Tackling Inequalities in Brazil, China, India and South Africa, 157-207. Washington: OECD Publishing
McKay, A. (2013). Growth and poverty reduction in Africa in the last two decades: Evidence from an aerc growth-poverty project and beyond. Journal of African Economies, 22 (suppl 1), i49-i76
McMillan, M. S. & Harttgen, K. (2014). What is driving the African Growth Miracle? (No. w20077).
National Bureau of Economic Research McMillan, M. S. y Rodrik, D. (2011). Globalization, structural change and productivity growth (No. w17143). National Bureau of Economic Research.
Ocampo, J. A., Rada, C. & Taylor, L. (2009). Growth and policy in developing countries: a structuralist approach. NY: Columbia University Press.
Piketty, T. (2014). Capital in the 21st Century. Cambridge: Harvard University Press.
Proto, E. (2007). Land and the transition from a dual to a modern economy. Journal of Development Economics, 83 (1), 88-108.
Ravallion, M. & Chen, S. (2007). China’s (uneven) progress against poverty. Journal of development economics, 82 (1), 1-42.
Rodrik, D. (2014). The past, present, and future of economic growth. Challenge, 57 (3), 5-39.
Sachs, J. D. (2012). From millennium development goals to sustainable development goals. The Lancet, 379 (9832), 2206-2211.
Subramanian, A. & Kessler, M. (2013). The hyperglobalization of trade and its future. Peterson Institute for International Economics Working Paper, 13-6.
Thorbecke, E., & Duyang, S. (2016). Is Sub-Saharan Africa Finally Catching up? In: Development Paths and Structural Transformation in the Escape from Poverty. New York: Oxford University Press.
Timmer, C. P. (1988). The agricultural transformation. Handbook of development economics, 1 (Part II), 276-331.
Timmer, P. (2007). The structural transformation and the changing role of agriculture in economic development: empirics and implications. Wendt Lecture.
Tsounta, E. y Osueke, A. (2014). What is Behind Latin America’s Declining Income Inequality? International Monetary Fund (14/124).
UNCTAD (2012). Handbook of Statistics. Geneve: Switzerland: United Nations.
Vollrath, D. (2009). How important are dual economy effects for aggregate productivity? Journal of development economics, 88 (2), 325-334.
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