Economic Convergence and Income Inequality: Cases of Argentina, Brazil, and China

Abstract

As the countries of the world become more connected through trade, the impact of the policies of influential industrializing countries becomes more important. These countries create various economic policies to cover the development gap between them and the wealthy parts of the world. Convergence theory suggests that in the process of global economic development, there is a predicted decrease in inequality between rich and poor countries or between developed and developing countries. Despite a significant decrease in inequality between developing and developed countries, positive economic outcomes are not enough to decrease inequality within the developing countries. In addition to significant economic growth, policies structured to accumulate human capital and build a welfare state are important to decrease inequality within each developing country, given that the country is not an autarky. Otherwise, accumulation of capital that happens naturally during the stage of fast economic growth will increase the inequality gap between the rich and the poor within the country. Looking at the case studies of China, Argentina and Brazil as currently influential industrializing countries, this research paper will highlight the relationship between economic growth and inequality in each discussed country and illustrate how successful investment in the country's human capital is decreasing inequality among its citizens. [From the introduction]