INCOME INEQUALITY AND INDUSTRIAL-DEVELOPMENT - DUALISM REVISITED

I argue that the inverted-U shaped relationship between income inequal ity and development (Kuznets curve) is largely accounted for by transi tional development processes related to the dualism (both economic and generalized) of traditional and modern sectors of developing societie s. Whereas Kuznets identified the central role of sector dualism in th e evolution of income inequality I identify generalized sociocultural dualism as a second critical factor. Regression analyses based on 56 c ountries circa 1970 show that the curvilinearity of the inequality-dev elopment relationship is captured by a core model involving three proc esses: the spread of education, the demographic transition and general ized dualism, and labor force shifts and sector dualism. These three p rocesses are represented in regression models by four variables that h ave significant effects on inequality in directions predicted by the c ore model: (1) secondary school enrollment (negative effect), (2) natu ral rate of population increase (positive effect), (3) sector dualism (positive effect), and (4) percent labor force in agriculture (negativ e effect). In general, the effects of variables that have been previou sly proposed as causes of income inequality vanish or are attenuated i n the presence of this core model.