Growth and Inequality in the Dual Model of Development: The Role of Demand Factors

Abstract

This paper relates growth and income distribution in the development of a dual economy. Its originality lies in the fact that the analysis of income inequality uses the whole Lorenz curve instead of some summary measures, and that the dual economy is represented through a fully-specified general equilibrium model. Conditions for particular shifts in the Lorenz curve are derived. They mostly involve the income and price elasticities of demand faced by the traditional sector of the economy, and suggest that an unambiguous drop in income inequality is somewhat unlikely at the dual stage of development.

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