Question

does lewis model predicts that inequality in a country would never stop expanding as the country industrialize?

Answer 1

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Yes I agree that  lewis model predicts that inequality in a country would never stop expanding as the country industrialize

Introduction

The growth of income inequality in many countries of the Western world over the last thirty years has significantly bolstered the centrality of inequality to debates in economics, social sciences, and policy making. Nevertheless, inequality's somewhat unexpected return to public consciousness and research agendas has confronted social scientists and policymakers alike with the finding that most knowledge of its fundamental causes and effects is still limited and often highly contested. As a result, many economists have turned to the past for more insight into the underlying logic of inequality movements through time.

Remedies to reduce inqequality in country

Ensure guaranteeing a job with a family-sustaining wage, adequate family and medical leave, paid vacations, and retirement security to all people of the United States."

Providing all people of the United States with – (i) high-quality health care; (ii) affordable, safe, and adequate housing; (iii) economic security; and (iv) access to clean water, clean air, healthy and affordable food, and nature."

"Providing resources, training, and high-quality education, including higher education, to all people of the United States."

Following are the causes that determine the level of income inequality in a country

1) Unemployment

The main reason for low level of income is unemployment and underemployment and the consequent low productivity of labor. Low la­bor productivity implies low rate of economic growth which is the main cause of poverty and inequality of the large masses of people. In fact, inequality, poverty and unemployment are inter­related. Since sufficient employment could not be created through the process of planned economic development, it was not possible to increase the income levels of most people.

2) Inflation

Another cause of inequality is inflation. During inflation, few profit earners gain and most wage earners lose. This is exactly what has happened in developing countries. Since wages have lagged behind prices, profits have increased. This has cre­ated more and more inequality. Moreover, during inflation, money income increases no doubt but real income falls. And this leads to a fall in the standard of living of the poor people since their purchasing power falls.

3) Tax Evasion:

In India, the personal in­come tax rates are very high. High tax rates en­courage evasion and avoidance and give birth to a parallel economy. This is exactly what has hap­penned in India during the plan period. Here, the unofficial economy is as strong as (if not stronger than) the official economy. High tax rates are re­sponsible for inequality in the distribution of in­come and wealth. This is due to undue concentra­tion of incomes in a few hands caused by large- scale tax evasion.

4) Regressive Tax:

The indirect taxes give maximum revenue to the government. But they are regressive in nature. Such taxes have also cre­ated more and more inequality over the years due to growing dependence of the Government on such taxes.

companies and persons. So a general citizen is unable to generate wealth and remain poor

This income inequality can be understood with the below cases

Case Nr. 01 - OLA

Advancement of technology-based service offered by OLA in urban area has created an ever-expanding employment market for the unskilled and the medium-skilled and its helped to earn income to unskilled labor

Whereas in rural area traditional means of transportation like Rickshaw and Jeeps have low income sources

Case Nr.02 - Infosys

Prominent company Infosys with the help of digitization has enabled Indian businesses to establish linkages with foreign customers, allowing both scale-up and scale-out in terms of employment of low-skilled and medium-skilled workers.

Whereas traditional way of doing business like Grossary shop owners remain poor with low income

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