Income Distribution and Growth

The relationship between income distribution and the level and growth of national income has been studied intensively in the recent literature. However, the main concern of this literature has been with the influence of income levels on the inequality of income distribution. Thus, there have been many studies examining the extent to which the way income is distributed in countries at different income levels follows Kuznets’ Law that income inequality increases with the level of per capita income up to a point and declines thereafter, i.e. that the relationship between inequality and income level is positive at low levels of income and negative at higher levels. The influence of different rates of growth of income on inequality has also been examined, but as pointed out by Ahluwalia (1976, pp. 335–7), the available data do not show any significant relationship.