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Structural Transformation And Income Inequality, Revisited

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  • Fumihide Takeuchi

    (Professor, Tokai University, Japan)

Abstract

This study analyzes the mechanism of structural transformation, defined as the reallocation of economic activity from high-productivity tradable sectors (agriculture and manufacturing) to lowproductivity service sectors, and its implications for changes in the overall distribution of income within an economy. The focus is on the observed fact of development that the service sectors employment share tends to increase at a faster rate than does the sectors value-added share. An empirical analysis indicates that the different rates of changes in employment and value-added shares account for a stagnant increase in per capita income in the service sector, resulting in interpersonal income inequality as economic development progresses and the service sectors share increases. Next, we present a simple static model to analyze the difference between employment and value-added shares and determine that the change in the relative capital intensity of the tradable sector versus that of the service sector is a key factor in causing the difference

Suggested Citation

  • Fumihide Takeuchi, "undated". "Structural Transformation And Income Inequality, Revisited," Review of Socio - Economic Perspectives 201942, Reviewsep.
    • Handle: RePEc:aly:journl:201942
    DOI: https://doi.org/10.19275/RSEP068
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    References listed on IDEAS

    as
    1. Mai Dao & Ms. Mitali Das & Zsoka Koczan & Weicheng Lian, 2017. "Why Is Labor Receiving a Smaller Share of Global Income? Theory and Empirical Evidence," IMF Working Papers 2017/169, International Monetary Fund.
    2. Mollick, André Varella, 2012. "Income inequality in the U.S.: The Kuznets hypothesis revisited," Economic Systems, Elsevier, vol. 36(1), pages 127-144.
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    More about this item

    Keywords

    : Structural transformation; income distribution; value-added and employment shares of services; capital intensity;
    All these keywords.

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • O14 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology
    • O15 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models

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