Are income, expenditure and wealth indicators the right way to measure inequality?

Researchers spent many years studying the relationship between inequality and development, and especially between inequality and economic growth. Francois Bourguignon (Paris School of Economics) gave an inspiring speech in the GDN Annual Development Conference titled ‘The Analytics of the inequality-development relationship: Where do we stand?’, where he introduces new ways to measure the relationship between inequality and development.

Bourguignon further clarifies that due to extensive research in this area, researchers now understand why, when economic resources are equally distributed, it is difficult for the economy to grow and differ.  And that makes him wonder whether the ways in which inequality measures are the right ones in place. Researchers generally observe income levels, consumption expenditures, and wealth to measure inequality. However, Bourguignon argues that researchers need to look into things like access to labor market, discrimination on the labor market, and/or discriminations on housing. He believes that this kind of inequality results in an inefficiency and inequality in the standard of living.

Using inequality and standard of living as explanatory factors for development does not yield to accurate results, whereas inequality of the standard of living and development are both the consequences of more fundamental upstream inequality which today researchers are not measuring in a satisfactory way.

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