Book
The developer’s dilemma

Structural transformation, inequality dynamics, and inclusive growth

The developer’s dilemma is thus: developing countries seek inclusive economic development — i.e., structural transformation — sufficiently broad-based to raise the income of the poor. Inclusive economic growth requires falling income inequality to maximise income growth at the lower end of the distribution.

Yet, this is at odds with Kuznets’ hypothesis that economic development puts upward pressure on income inequality — at least in the absence of countervailing policies. Our book explores the developer’s dilemma between structural transformation and income inequality.

The core questions of the book are: (i) What are the varieties of structural transformation experienced in developing countries? (ii) What inequality dynamics are associated with each variety? (iii) Which policies have been utilised to manage trade-offs between structural transformation, income inequality, and inclusive growth?

These are answered using a comparative case study approach, contrasting nine developing countries while employing a common analytical framework and a set of common datasets across the studies.

Endorsements

Development has multiple objectives — pro-poor growth and equality top the list. Finding balance between growth and equality in economic transformation is necessary. Policy makers face difficult choices navigating long-term development objectives with limited resources and political support. This book explores countries’ experiences dealing with these dynamic objectives. The Kuznetsian dilemma between transforming the economy and inequality reiterates the need to complement structural transformation with redistributive policy instruments in social protection, health, education, and employment. Sri Mulyani Indrawati, Minister of Finance of the Republic of Indonesia

The developer’s dilemma and challenge is how to achieve structural transformation towards a productive economy, ensuring equitable distribution of benefits from this transformation. The challenge has been posed by the greats of development economics from Simon Kuznets and Arthur Lewis onwards. This excellent volume presents detailed, country- and context-specific explorations of the dilemma and the challenge, concluding that government policies are essential to address the dilemma and to meet the challenge. The volume will be a great resource for researchers and policy analysts alike. Ravi Kanbur, Cornell University

This is an important book which challenges simplistic views about development trade-offs, giving a fascinating answer to a critical question facing development planners: does structural transformation inevitably increase inequality? Nine country studies explore relevant experience. No simple answers emerge, with many combinations of structural transformation and inequality. The book emphasises the critical importance of redistributive public policy if rising inequality is to be avoided. It should be read by every policy maker striving to control inequality and reduce poverty while promoting structural transformation. Frances Stewart, University of Oxford