Economic development and its effects on income distribution in developing and developed countries

This paper investigates the progress of economic development and its effects on income distribution in Bangladesh (developing) country and Australia (developed one) during 1970-2005. It is found that both countries made good economic development during this period based on a number of criteria such as per capita income. Income inequality in both countries however increased significantly based on a widely used Gini coefficient and other measures such as income shares in top and bottom deciles and some new measures. It also investigates the relationship between economic development and income inequalities, using various household expenditure survey data and finds that all inequality measures are significantly higher in Bangladesh compared to Australia. Also, the ratio and income share gap between the top and bottom deciles are significantly higher for Bangladesh than Australia. This implies that at the time of economic growth, income inequality grows significantly faster in developing countries than in developed countries.