Income Distribution and Economic Growth in LDCs Essay -- essays paper

Income Distribution and Economic Growth in LDC's INTRODUCTION In recent years, one of the major concerns of economic development is the study of poverty, the income distribution and growth in the less developed countries (LDC’s) or Third World countries. Economists from all over the world have been doing researches and studies on how to induce a growth in those underdeveloped countries. However, countries differentiate in historical backgrounds, cultural believes and natural resources. As a result, the government would implement different strategies to attain a much fairer distribution of income among the society. The relationship between the income distribution and growth in the LDC’s is a significant factor that would affect government policies. Also, the study of the strategies, promoted from the government, would show us how the government can enable economic growth with a more equal income distribution. INCOME DISTRIBUTION AND ECONOMIC GROWTH For years, most of the more developed countries have been helping the less developed countries. Most of them believed that the only solution to the problem of poverty is to make the GDP grow. However, some other questions may arise as to who would make it grow, and should they be the few or the many. If it is the many who need to make it grow, then the GDP may be shared more equally. On the other hand, in order to make the GDP rise, we need to make decisions in production. The Production Possibility curve can show us the maximum amounts an economy can produce, but it doesn’t tell us which decision would be made. A country makes the decision on what to produce is accordance to the income distribution. The most ideal case is to have perfect income equality (Gini Coefficient equal to 0) in one society. However, studies tell us that this can never be reached. In most of the more developed countries, a Gini Coefficient (G.C.) of 0.2 to 0.35 is considered to be in relative equa lity. One may wonder what is the G.C. in the less developed countries? The answer is assumed to be a number in the higher rank. In fact, in most LCD’s, the G.C. is about 0.5 to 0.7 or even higher. This shows us that the problem of income inequality is very seriously in those countries. â€Å"We were taught to take care of our GNP as this will take care of poverty. Let us reverse this and take care of poverty as this will take care of po... ...ad to many positive notes such as increase in productions, employments, and indirectly increase the local investments. Increase in productions, employments and capitals in the country thus enable a growth in the economy and therefore, the government should make careful decisions keeping in mind that of the impact these factors have on the societies. Bibliography: Judith Randel and Tony German., The Reality of Aid 1998/1999, UK:Earthscan Publications Ltd., 1998 Adelman and Morris: Economic Growth & Social Equity in Developing Countries, California: Stanford University Press.,1973 David Dembo, Clarence Dias, Ward Morehouse, James Paul: The International context of Rural Poverty in the Third World, Newyouk: Council on International and Public Affairs, Inc., 1986 Jacques Lecaillon, Felix Paukert, Christian Morrisson, Dimitri Germidis. Income Distribution and economic development,French:International Labour Organisation., 1984 Gary S. Fields. Poverty, Inequality, and Development, New York: Cambridge University Press.,1980 Michael P. Todaro. Economic Development, New York: Longman.,1994 Simon Kuznets. Population Capital & Growth, New York: W.W. Norton & Company. Inc.,1973