Choose the correct answer and discuss with concrete examples:
If the development process is characterized by what we have called "modern sector
enlargement", the relationship between GNP per capita and inequality in the distribution of
income can be expressed as
a. a strictly decreasing relationship b. a strictly increasing relationship c. no relationship d.
first increasing and then decreasing
The correct answer would be d. first increasing and then decreasing.
In the initial stages of development, as the modern sector grows and expands, it tends to create inequality in the distribution of income. This is because the modern sector typically consists of industries that require higher skills and education, leading to higher-paying jobs. As a result, individuals working in the modern sector tend to earn higher incomes, while those in the traditional sector are left behind.
However, as the development process continues and the modern sector further expands, it starts to create more opportunities for individuals to move out of the traditional sector and into higher-paying jobs in the modern sector. This helps to reduce income inequality in the long run.
Concrete examples of this pattern can be observed in many developing countries. For instance, in countries like China and India, the rapid growth of the manufacturing and services sectors initially led to an increase in income inequality. However, over time, as more people were able to access education and training, and as technological advancements spread, more individuals were able to participate in the modern sector, leading to a decrease in income inequality.
Another example can be seen in the experience of South Korea. In the 1960s and 1970s, South Korea experienced rapid industrialization, accompanied by a significant increase in income inequality. However, as the country invested heavily in education and human capital development, more people were able to access higher-skilled jobs, resulting in a decrease in income inequality in the subsequent decades.
Overall, the relationship between GNP per capita and inequality in the distribution of income is not a simple one, but rather a dynamic process where initially inequality may increase, but as development progresses and more individuals are able to benefit from the modern sector, inequality tends to decrease.