Structural Changes and T H E Distribution of Income by Size: T H E Case of India

The interrelation between changes in the economic structure, i.e., industrial distribution of income and labor force, and the size distribution of income i s studied in this paper in a case study of India (1951-1980). The change in the size distribution of income i s the sum of changes due to ( 1 ) inter-sectoral factors and ( 2 ) intra-sectoral factors. The need for this distinction i s emphasized by the result obtained for India, that 85% of the changes in the size distribution m a y be assigned to inter-sectoral factors, and only 16% to intrasectoral factors. Since the inter-sectoral factors are signiJicantly in$uenced by changes in the industrial distribution of income and labor force, our result points out a relation between economic growth and the size distribution which quite often i s overlooked in studies of the size distribution. The results obtained in this paper support several cross-section results of Professor Kuznets. In particular some of these are: ( a ) inter-sectoral inequality in the economic structure widened .with economic growth, ( b ) the inequality in the size distribution of India widened, ( c ) the level of inequality in India i s higher than in any of the eight developed countries considered.