Income Inequality in Developing Countries

王靜

Income Inequality and Main Arguments

Income inequality and economic growth are great concerns for the whole world today， particularly for developing countries. This article argues that income inequality is vitally important for developing countries not only for their economic growth but also for social progress. Its reasonableness can be proved by Chinas experience in recent years. China has been experiencing an enlarging disparity of wealth， which has already dragged Chinas economic development and even led to social problems. Therefore， putting great emphasis on alleviating income inequality is necessary for further sustainable development in developing countries.

Importance of Income Inequality

First， income inequality plays a prominent role in influencing economic development and the progress against poverty. Ravallion（2014） has done plenty of surveys in developing countries and found that in terms of mean household income， those experiencing falling inequality see the $1.25 poverty rate falling at a median rate of about 1.30% points per year versus a median fall of only 0.42% points per year for countries with rising inequality， and the initial inequality reduces the growth elasticity of poverty reduction， and negatively impact investment， innovation and reform， thus further influence the poverty rate and subsequent growth rate.

Second， income inequality is an important determinant of disparities in non-income dimensions of well-being such as education， health， and gender inequality. In UNDP（2013）， it has been demonstrated that income inequality restrict the opportunities disadvantaged group get to live a better life， and， in turn， the unequal opportunity will cause unequal outcome， so that the poor become poorer， and the rich become richer. Moreover， income inequality between men and women can exacerbate gender inequality， hence further lead to other social problem such as mass mobilization.

Third， income inequality will undermine the environment and harm the future generation. In “Is inequality bad for environment”， Boyce（2007） claims that people who are relatively wealth tend to generate more environmental harm， while those who are poor tend to withstand the adverse effects. Consequently， the wider the disparity is， the greater the environmental hazard will be.

Solutions

To deal with the inequality issue and spur on sustainable development， government intervention is suggested to narrow income disparity. First and foremost， government can moderate income inequality by increasing the incomes of low-income household. Government can change the pattern of economic growth by improving the employment policy to ensure sufficient income and protection for disadvantageous people. Also， government can redistribute capital by welfare program and taxation to increase the income of poor people， such as giving subsidies. In addition， making legislative or administrative reform to expand opportunities of the poor， so that they can be accessible to more jobs is also a practical way to narrow the wealth gap. Secondly， government should pay attention to prejudice， discrimination and social exclusion which prevent certain group from pursing equal opportunity. To tackle these problems， government is required to strength the political participation of such groups， nurture a democratic and equal political environment for them， and try to empower them with equal power. Finally， individual or groups should also make an effort to fight for themselves so that their interest can be protected. To achieve this， it is suggested to nurture sense of responsibility of the public and encourage people to participate in politics.

Conclusion

In brief， confronting with income inequality is critical for developing countries. Ignoring inequality but focus only on promoting economic growth is a prevailing orthodoxy for many counties， however， from above analysis， it is concluded that this view is unreasonable， because income inequality is important for economic growth as well as social development. Therefore， government should take action to narrow wealth disparity so that developing countries can develop sustainably.

References：

[1]Boyce， J， 2007， “Is Inequality Bad for the Environment？”

[2]Ravallion Martin， “Income inequality in the developing world”， SCIENCE， seciencemag.org

[3]United Nations Development Program （UNDP）， 2013， “Confronting Inequality in Developing Countries”