20. Choose the correct answerand 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 is d. first increasing and then decreasing.
When a country experiences "modern sector enlargement", it means that there is significant economic growth and development in certain sectors, typically those that are more modern and technologically advanced. This kind of development often leads to increased income and wealth disparities among different groups of people.
At the early stages of modern sector enlargement, income inequality tends to increase. This is because the benefits of economic growth primarily accrue to a small group, such as highly skilled workers or capital owners, while the majority of the population may not see significant improvements in their living standards. As a result, the gap between the rich and the poor widens, causing an initial increase in income inequality.
However, as the development process continues and the benefits of growth trickle down to a larger portion of the population, income inequality can start to decrease. This happens when the majority of people begin to participate in the modern sectors, gain access to better jobs and higher incomes. Thus, the initial increase in income inequality is followed by a gradual decrease as more people benefit from the development process.
Concrete examples of this pattern can be seen in countries like South Korea and China. In the early stages of their economic development, income inequality increased significantly due to the concentration of wealth and benefits in certain industries or regions. However, as the development process continued and the benefits of growth spread to a wider population, income inequality started to decrease.
It is important to note that this pattern may not necessarily hold true in all cases, as various factors such as government policies, social programs, and institutional frameworks can influence the relationship between GNP per capita and income inequality.