The Relationship between Development and Income Equality : An Empirical Analysis

Economic growth in Less Developed Countries (LDCs) over the last fifty years has often been accompanied by increasing income inequality. To explore this problem, we studied the relationship between income equality and development for forty LDCs using principal component analysis followed by multiple regression analysis. We found that income equality was strongly negatively correlated with the level of economic development. However, it was lower when economic growth was open to the world via export-orientation and exchange-rate stability, when the population growth rate was low, and when urban growth in regional areas was strong