Inequality in Emerging Countries

Abstract

We review the theoretical and empirical economic literature upon income inequality in emerging countries. We firstly describe the main observed developments and show that these are rather diverse across countries and developing regions. We subsequently expose the main theoretical mechanisms. We make a distinction between the traditional approaches (Kuznets, Lewis, Stolper-Samuelson) and the new explanations. In the latter, globalization and globalization-driven technological changes are at the core of the analyses. Both approaches bring out several opposite mechanisms. Finally, the empirical estimates display rather conflicting results. Most crosscountry studies find a weak impact of globalization on income inequality. In contrast, several longitudinal studies concerning countries taken separately or small groups of countries reveal a positive correlation between openness and the relative demand for skill and inequality. These apparently conflicting findings reflect the opposite mechanisms linked to globalisation and the differences in countries' experiences.

Catching-up, structural transformation, and inequality: industry-level evidence from Asia

“…According to our preferred specification, closing the productivity gap by 10% raises the wage gap by about 2%. This result is coherent with existing literature, assuming that productivity catch-up with advanced economies increases the demand for skills and widens wage inequality (Zhu and Trefler, 2005;Chusseau and Hellier, 2012). While there are several potential explanations, our evidence suggests that within-industry technological upgrading needs to be accounted as a key factor in our Asian sample.…”

“…Such trends are consistent with existing theoretical literature, which shows that productivity catch-up with advanced economies can result in higher inequality (Zhu and Trefler, 2005;Chusseau and Hellier, 2012). Several mechanisms, in particular technological upgrading and globalization, can explain this relationship.…”

“…More recently, a growing strand of literature has investigated the determinants of wage inequality in emerging and developing countries too. Pushed by productivity catch-up with more advanced economies and by structural transformation, sustained economic growth in many developing countries has generally resulted in rising inequality due the higher demand for skills (Berman and Machin, 2000;Chusseau and Hellier, 2012).…”

Catching Up, Structural Transformation, and Inequality: Lessons from Asia

“…Following the theoretical literature (see Chusseau and Hellier 2012), our main hypothesis is that productivity changes leading to catching up with advanced economies can result in higher inequality. The underlying assumption is that by reducing the productivity gap with more advanced economies, Asian economies start introducing new, and higher skill-intensive productions that increase the demand for skills (Zhu and Trefler 2005).…”

The Impacts of Rural Property Rights on Urban Unemployment, Wage Inequality, and Welfare in Developing Countries

“…Notes 1 Surveys on the subject can be found in Anderson (2005), Goldberg and Pavcnik (2007), and Chusseau and Hellier (2013), and others. 2 The concept of rural property rights can be referred to Pi and Zhou (2015b).…”