Knowledge that Transforms

This paper relates growth and income distribution in the development of a dual economy. Its originality lies in the fact that the analysis of income inequality uses the whole Lorenz curve instead of some summary measures, and that the dual economy is represented through a fully specified general equilibrium model. Conditions for particular shifts in the Lorenz curve are derived. They mostly involve the income and price elasticities of demand faced by the traditional sector of the economy, and suggest that an unambiguous drop in income inequality is somewhat unlikely at the dual stage of development. Copyright 1990 by The Review of Economic Studies Limited.

This paper introduces the Bolker-Jeffrey version of expected utility theory, which differs in several important respects from the versions commonly used by economists. Within the Bolker-Jeffrey theory, the paper proves a theorem first proved by Harsanyi: if social preferences are coherent and Paretian, and individual preferences are coherent, then social utility can be taken to be the sum of individual utilities. But the paper shows that in the Bolker-Jeffrey theory the proof requires very stringent assumptions. It assesses the significance of this fact.