Changing Perspectives on Inequality and Development

Abstract

The paper considers how thinking on inequality in relation to development has evolved over the last half century, including three critical questions: why be concerned about inequality; inequality of what; and among whom. Fifty years ago, inequality was defined unidimensionally in terms of incomes, with a focus on inequality among individuals, and it was regarded purely instrumentally, as a means to achieve higher economic growth. Since then, the objectives of development have widened while the extent of inequality is increasingly regarded as important in itself, for justice, as well as instrumentally. Exploration of inequality and its effects now extends to a plurality of dimensions. Consideration of inequality among whom has also broadened, beyond inequality among individuals (vertical inequality), to concern with inequality among groups (horizontal inequality) both in relation to justice and instrumentally. Evidence suggests that greater horizontal equality tends to reduce violent conflict, and greater vertical equality to reduce criminality, while both are likely to improve social outcomes and promote sustainable growth. The paper argues that although the objective of achieving more equality is increasingly accepted, many countries are experiencing more inequality and few effective redistributive measures have been adopted. It reviews how political economy considerations explain this paradox.