ABSTRACT
A fundamental tenet of conventional economic theory is that there is only one sustainable wage path to economic development and, in the long run, economies converge in terms of real per capita gross domestic product (GDP) and mean factor prices. Thus there can be no such thing as a high wage path to economic growth and development since convergence occurs through the process of interregional and international trade and factor mobility and is facilitated by the unfettered working of the marketplace. 1 But, the empirical evidence is heavily weighted in favor of the argument that convergence has not taken place internationally over time, with low and high income economies persisting side by side (Baumol 1986; Baumol and Wolff 1988; De Long 1988; Dowrick and Gemmell 1991; Olson 1996; Pritchett 1997). The absence of convergence raises theoretical and practical questions as to why convergence has not taken place. Moreover, contrary to both conventional and non- conventional models there is a negative correlation between either per capita income or per capita income growth and income inequality across nations, which contravenes the long held belief that income inequality and increases thereof are conducive to economic growth (Altman 2004b, 2008b; Aghion et al. 1999; Deininger and Squire 2008).
