The basic premises followed in the study of the link between economic growth and income inequality in developing countries are as follows:
One of the basic problems in adhering to these premises is the problem of overpopulation in developing countries. Overpopulation has led to a state where any amount of resources is considered scarce. When the domestic demand is not met, there is little scope to export any produce. The lack of exports leads to a deficit in direct foreign investments which is the key towards achieving the following:
As may be seen above, the problem of overpopulation brings the problem of lack of employment opportunities. There are too many people to fill a job vacancy. The ratio of human resource availability to actual vacancies is disproportionate. Thus, there is a disparity in incomes that has a direct effect on resources. Resources become scarce when there are too many people demanding it. With too much of demand, any resource becomes overpriced. This leads to a situation where people end up spending most of their income on the procurement of basic necessities and finally, frequent cases of inflation. This has a direct bearing on the progression of economic growth. (Bardhan, 1996)
In the case of India, one may find that overpopulation as led to such problems. Agriculture is the predominant economic sector in the country, yet it has to import wheat to feed its domestic demand. let alone having enough to export. This has led to an imbalance in the import-export scenario which has led to a slow rate of economic growth. (Bardhan, 1996)
Poverty refers to deprivation in spheres like food, education, shelter, health care systems, basic human rights and many more. Underdeveloped and developing countries face this problem. The ways in which poverty can be reduced are as follows:
2. b) Leakages from transfer programs to non-target groups are often considerable. Using a model of incentive .arguments due to Besley and Coate (1992), illustrate the behavioural response and the associated issue of self-targeting.