Rural and Urban Income Inequality and Poverty: Does Convergence between Sectors Offset Divergence within Them?

Robert Eastwood and Michael Lipton

in Inequality Growth and Poverty in an Era of Liberalization and Globalization

Published in print March 2004 | ISBN: 9780199271412
Published online August 2004 | e-ISBN: 9780191601255 | DOI:

Series: WIDER Studies in Development Economics

 Rural and Urban Income Inequality and Poverty: Does Convergence between Sectors Offset Divergence within Them?

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Explores recent trends in developing and transitional economies in rural–urban, rural, and urban inequality of income and poverty risk, and the offsetting trends in inequality hypothesis (OTI), which claims that, underlying the overall inequality trend, there has been a tendency for rising intrasectoral inequality to be offset by falling rural–urban inequality. The data reviewed in the chapter refute OTI with the possible, partial exception of Latin America: first, the data show no overall tendency for within‐country rural–urban inequality to increase or decrease since the 1980s; second, while modest national and regional tendencies exist, they do not, on the whole, offset trends in overall inequality. Urban–rural ratios of both mean consumption and poverty risk have commonly either risen or fallen alongside total inequality, or even been trendless. Changing urban–rural ratios of poverty or per‐person consumption need not imply changing urban bias; they may be caused by exogenous changes in relative returns to urban activities, plus entry or exit barriers, although rural‐urban inequality trends in ‘human development’ indicators (literacy, longevity, etc.) do suggest rising urban bias. The chapter is arranged in three sections: Introduction and Summary; Rural–Urban and Intrasectoral Contributions to Changes in the Overall Inequality of Consumption or Income—an econometric analysis; and Changing Rural–Urban Poverty Ratios and ‘Urban Bias’.

Keywords: consumption inequality; convergence; developing countries; developing economies; divergence; econometric analysis; income inequality; inequality; intrasectoral inequality; offsetting trends in inequality hypothesis; poverty; rural–urban consumption ratios; rural–urban inequality; Rural–Urban Poverty Ratios; rural–urban ratios; transitional countries; transitional economies; urban bias

Chapter.  14286 words. 

Subjects: Economic Development and Growth

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