Trends of Income Distribution in Bangladesh and Relationship with Growth – Theories and Evidences

Abstract

Income distribution is very substantial for economic and social advancement. It affects the structure of the society, limits the level of poverty for any specified average per capita income and poverty puts pressure on growth. Different Household Expenditure Survey data of 2000, 2005 and 2010 are used to review the trends of income distribution in Bangladesh. The Decile techniques and Gini coefficient measures are used to explain the recent trends. In addition, the shares of income of the uppermost and lowermost deciles are also used to show the income dispersal in Bangladesh. It is revealed that Bangladesh has exposed visible economic growth but income disparity has increased rapidly over time. The study is also measured the affiliation between economic growth and income disparities, using a new practical form that fits the data well. Most of the upshots suggest that inequality has a substantial positive influence on economic growth. It reapproves the Kuznets’ hypothesis that at an initial stage of progress, disparity of income rises and it decreases again. Although, it provides empirical evidence that the distribution could have a positive effect on economic growth in low-income countries rather than the growth effects on distribution. The positive relationship is a contrary result to the recent empirical findings but indicates that more research is indispensable to fully understand the composite affiliation between income distribution and economic growth.