Economic Development, Equality, Income Distribution, and Ethics

Authored by: Erik Thorbecke

Handbook of Contemporary Behavioral Economics

Print publication date:  July  2006
Online publication date:  January  2015

Print ISBN: 9780765613028
eBook ISBN: 9781315703879
Adobe ISBN: 9781317469162


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The essence and major objective of socioeconomic development is raising the standard of living of all individuals and particularly that of the poor. 1 It has become almost universally accepted that in the setting of low-income third world countries economic growth is a necessary condition for poverty reduction. A crucial issue in this context is whether a relatively unequal income distribution is also a precondition for growth to occur. This was the prevailing view under the classical framework, based on the argument that the rich (the capitalists) save a larger proportion of their income than the poor (the workers). Hence, for a given level of total income a more unequal income distribution would generate a larger flow of aggregate savings that could be channeled into investment to yield a higher growth rate of GDP.

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