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Growth and Wage Inequality in a Dual Economy

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  • Jonathan R. W. Temple

Abstract

Who benefits from economic growth? This paper analyses the distributional impact of different types of growth within a two‐sector model. The paper first presents necessary and sufficient conditions for unambiguous changes in wage inequality in a dual economy, based on analysis of the entire Lorenz curve. These conditions are then applied to the Harris–Todaro model with an urban non‐agricultural sector and rural agriculture. It is shown that capital accumulation or technical progress in agriculture can shift the Lorenz curve inwards and reduce wage inequality, while the effects of development in non‐agriculture are typically ambiguous.

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  • Jonathan R. W. Temple, 2005. "Growth and Wage Inequality in a Dual Economy," Bulletin of Economic Research, Wiley Blackwell, vol. 57(2), pages 145-169, April.
  • Handle: RePEc:bla:buecrs:v:57:y:2005:i:2:p:145-169
    DOI: 10.1111/j.0307-3378.2005.00218.x
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