Inequality and development

Abstract

Inequality can be analyzed from various aspects. In this paper our attention is drawn to economic inequality, most frequently manifested through income and wealth. The measurement of economic inequality is a complex task. The Lorenz curve and a number of numerical indices are applied, and let us mention the following ones: the Gini coefficient, the coefficient of variation, the Theil index and the Atkinson measure. These indices do satisfy the criteria (principles) presenting, according to general consent an appropriate measure of economic inequality: anonymity (symmetry) principle, population principle, relative income principle and the Dalton principle of transfer. In recent times, the problem of inequality has been attracting a lot of attention. The explanation should be sought in the widening of income differences (within individual countries and between them) and also in new knowledge about the relationship between inequality and development. The attitude to inequality being determined mainly by the economic development level (as presented in the Kuznets hypothesis) is gradually being replaced by the attitude to inequality being the determinant of income and its growth. Contrary to previous beliefs about the stronger income inequalities being favorable to the economic growth, more recent research has pointed to the fact that a more equal distribution of income through various channels, can possibly act as an efficient stimulus of growth.