ABSTRACT
The essence and major objective of socioeconomic development is raising the standard of living of all individuals and particularly that of the poor.1 It has become almost universally accepted that in the setting of low-income third world countries economic growth is a necessary condition for poverty reduction. A crucial issue in this context is whether a relatively unequal income distribution is also a precondition for growth to occur. This was the prevailing view under the classical framework, based on the argument that the rich (the capitalists) save a larger proportion of their income than the poor (the workers). Hence, for a given level of total income a more unequal income distribution would generate a larger flow of aggregate savings that could be channeled into investment to yield a higher growth rate of GDP.
