Within‐Set and Between‐Set Income Inequalities in a Developing Country

Abstract

The relation between economic growth and income distribution has been the subject of a growing body of empirical studies ever since the initial discussion by Kuznets, who argued that the income distribution in the early stages of growth in developing areas would most likely move in the direction of greater inequality. While there is substantial support for this hypothesis of relative inequality increase, recent cross‐country evidence does not corroborate a stronger hypothesis of a decline in the absolute income level of the poorer groups. Nevertheless, cross‐sectional analyses may be fraught with misleading generalisations, and the validity of the hypothesis will have to be assessed by the secular experience of individual countries. Within this focus, one country which does not appear to support the Kuznets thesis is Puerto Rico, where recent studies point to a movement toward greater income equality over the 1949–69 period. This paper, which covers the same two‐decade interval, attempts to throw further light upon the overall question by employing, in addition to the well‐known Lorenz/Gini measure, Theil's entropy index. The latter coefficient permits decomposition of given sets by quantifying between‐set and within‐set inequalities.

Citation

Andic, F.M. and Mann, A.J. (1978), "Within‐Set and Between‐Set Income Inequalities in a Developing Country", International Journal of Social Economics, Vol. 5 No. 1, pp. 42-50. https://doi.org/10.1108/eb013819