Distribution, redistribution and development: Where Do We Stand?

This paper provides a short survey of the recent theoretical and the empirical literature on the existence of a negative relationship between economic inequality on one hand, and growth or economic development on the other. The emphasis of the paper is on the lessons to be drawn from these recent development for the design of redistribution policies in developing countries. It is shown, in particular, that somewhat in contradiction with what is often read, recent models do not contradict the old conventional wisdom of a tradeoff between redistribution of current real income in favor of the poorest and economic efficiency.