Growth and Structural Change

Authors: Haroon Bhorat, Zaakhir Asmal, and Caitlin Allen

Since the 1950s, it has been accepted that income inequality may increase in the early phases of economic development, when growth is achieved through movement away from agriculture and toward manufacturing. In the later phases of development, this inequality gap is expected to narrow as more workers enter industrialized sectors. However, recent studies on developing countries do not support this expectation. This study asks whether structural transformation observed in developing countries differs from this traditional transformation-and-growth path, and if so, what are the implications for inequality in developing countries?