Book Chapter
The developer’s dilemma

This chapter discusses the ‘developer’s dilemma’—a tension emerging from the fact that developing countries are simultaneously seeking structural transformation and inclusive growth to raise incomes of the poor.

Simon Kuznets originally hypothesized that structural transformation may have a tendency—in the absence of policy intervention—to put upward pressure on income inequality. However, broad-based economic growth requires steady or even falling income inequality to maximize the growth of incomes at the lower end of the distribution.

The purpose of the chapter is: (i) to discuss the empirical experience of the developing world in terms of structural transformation and, in doing so, to outline a typology of ‘varieties’ of structural transformation; and (ii) to discuss the structural transformation–inequality relationship and how it may vary under different patterns of structural transformation.