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Preliminary Evalution of Economic Development and Its Effect on Income Distribution in Bangladesh

IJED, Vol. 9 No. 1, (2007)

This paper investigates the progress of economic development and its effects on income distribution in Bangladesh since her independence in 1970. Various Household Expenditure Survey data are used to evaluate economic development based on per capita income, percentage expenditure on non-food items, non-agricultural occupation, population below poverty line; and family size. While the traditional Gini index, shares of income of the top and bottom deciles as well as some new measures of income inequalities are used to show income distribution in Bangladesh since independence. It is shown that Bangladesh has made noticeable economic development but income inequality has increased at a rapid pace over time since her independence. This paper also investigates the relationship between economic development and income inequalities, using a new functional form that fits the data well. Results suggest that income inequality has a significant positive effect on economic development. It reconfirms the Kuznets’ (1955) hypothesis that at an early stage of development the inequality of income increases.

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