ABSTRACT
In addition, Kuznets suggested a second statistical mechanism that might have accounted for the trends in earnings inequality. Consider an agrarian economy embarking on early industrialization and assume for argument's sake that earnings are equally distributed within both sectors. I t is known that such economies exhibit far higher average earnings in non-farm than in farm employment. Accumulation in the industrial sector creates a rapid expansion in urban job vacancies, and rural-urban migration takes place to fill them. Obviously, the initial migration implies earnings inequality where there was none before since the migrants are now at the top of the earnings distribution, leaving the non-migrants at the bottom. When the demise of agriculture is virtually completes century later, the vast majority of wage earners are now in urban employment and the earnings distribution has returned to its initial egalitarian level, but at the higher average earnings. While Kuznets' second statistical mechanism seems plausible, Chapter 3 has shown that it accounts for little of the earnings inequality ;rends observed in nineteenth-century Britain. Instead, it was changes in pay differentials by sector, occupation and skill that contributed most to those inequality trends.
