How Urbanization Affects the Inequality in Developing Countries: A Critique of Kuznets Curve Cem yvat

According to the Kuznetss U-curve theory, urbanization increases inequality in developing countries during the first phase of industrialization. This argument is based on t o assumptions. !irstly, the increase in productivity is greater for the industrial population" secondly, inequality in urban areas is greater than or equal to inequality for rural areas. #o ever, the Kuznetsian argument could be false for many cases including the Tur$ish case, in hich rural inequality as relatively higher due to the social structure of the country. Therefore, in many developing countries the relation bet een inequality and income may be negative or be only slightly positive for the first phase of industrialization. This paper aims to prove that% &'( The argument suggested by Kuznets may not e)plain real changes in income distribution for many cases including Tur$ey &*( The long-run fall in +ini coefficient in Tur$ey may be highly related to the migration process ithin the country. Intro!uction In developing countries, the growth process not only alters the level of output or technology, but also changes the economic relations and the social structure. The development process involves significant changes in the levels of income of individuals; however, a part of the society usually benefits relatively more from the rising incomes. Therefore, in many cases the development process changes the income distribution; the income of a specific part of the society increases relatively more compared to the rest of the society. The first stage of the development process is usually associated with industrialization. As a country industrializes; individuals in urban areas benefit from rising productivities and the gap between per capita incomes of urban and rural areas increases. The growing benefits in the urban areas also alter the structure within the

society. Many individuals in rural areas decide to migrate to urban areas to take advantage of the industrialization and rising urban incomes. A part of the migration stream may be formed by lower income individuals that are mostly unskilled and illiterate. These individuals mostly have individual concerns and they mostly move to the informal urban sector for earning wages. The higher income individuals also migrate for e!ploiting the advantages of urban society; however, these individuals concern more about their family re"uirements and aim to generate income, education or remittances that could be useful for the whole family #$ipton, %&'(). In any case, urbanization preceded by industrialization changes economic structure and gains in the society. As the urbanization process alters the incomes of individuals, it will create significant changes in the income distribution both in the short and the long run. The impact of migration on ine"uality is e!plored by *uznets #%&++) in his A,article .,conomic /rowth and Income Ine"uality0, which forms a basis for *uznets1s inverted 2 curve theory. In his article, *uznets shows how demographic changes followed by industrialization alter income distribution within a country. 3e should notice that in his theory, *uznets is only concerned about the one way relation from development to ine"uality, he never mentions anything on the impact of ine"uality on growth. In fact, *uznets #%&45) says that6 .All we can say is that the une"ual distribution of income in the earlier decades in the presently developed countries did not prevent economic growth. 7ut8we cannot say that a somewhat or less #or more) une"ual size distribution might not have contributed to even faster growth.0. Therefore, our focus on this study will be on how development and urbanization affect the income distribution. The development process can change the overall ine"uality by affecting three factors. 9irstly, as the urban share increases, the urban ine"uality starts to make a greater contribution to overall ine"uality. :econdly, the industrialization could widen the urban rural gap; however, the impact of industrialization would be offset by factors like technological spillovers, changes in the terms of trade and rising land per capita. Thirdly, the development could change both within rural and urban ine"ualities. In *uznetsian framework, development may bring une"ual gains and the first phases of industrialization are associated with higher ine"uality. ;owever, in some cases the urbanization followed after the early stage of industrialization may have instant

positive effects on ine"uality. This instant positive effect may even offset the une"ualizing effect of the early industrialization. Thus, the start of industrialization does not guarantee a rise in ine"uality.

Development" urbanization an! the change of inequality in Kuznetsian framewor# The *uznetsian approach is considered as one of the most important approaches for e!plaining, how development affects ine"uality. According to *uznets #%&++), urbanization followed by industrialization is an important factor in the shift of ine"uality. *uznets says .an invariable accomplishment of growth in developing countries is the shift away from agriculture, a process usually referred to as industrialization and urbanization0. Thus, *uznets sees industrialization and urbanization as processes that are mutually developing at the same time. *uznets claims that urbanization increases ine"uality in the first stages of industrialization and he makes two crucial assumptions for strengthening his claim6 .a) the average per capita income of the rural population is usually lower than that of the urban; b) ine"uality in the percentage shares within the distribution for the rural population is somewhat narrower than in that for the urban population <even based on annual income; and this difference would probably be wider for distributions by secular income levels.0 3ith the given assumptions *uznets claims that increasing the urban population means increasing the share of the more une"ual component of the income distribution. Therefore, according to *uznets urbanization pursued by the migration process inherently raises ine"uality during the first stages of industrialization. :econdly, the emergence of industrialization raises the per capita income gap between the urban and rural population, until the benefits of industrialization are also shared by the rural population. Thus, .the relative difference in per capita income8is stable at best, and tends to widen because per capita productivity in urban pursuits increases more rapidly than in agriculture0.

The *uznetsian framework relies on the $ewis #%&+=) model that was outlined in $ewis1s classic article .,conomic >evelopment with 2nlimited :upplies of $abor0. $ewis claims that development is driven by rising profits and accumulation in the capitalist sector. The saving rates for the capitalist class are relatively higher compared to the working class, since the working class could only save for its essential e!penditures like housing, education etc. Therefore, according to $ewis, the amount of savings grows as the relative income of the capitalists rises. In his model, savings are realized as the ma?or source of capitalist accumulation, so $ewis concludes that .the central fact of economic development is that the distribution of incomes is altered in favor of the saving class0. The capitalist group accumulating in $ewis1s conte!t is mainly the capitalist industrial class. $ewis argues that merchants use their profits mainly for speculation and peasants would prefer to spend his profits for enlarging his land, not his capital. @nly the class of industrialists reinvests its profit productively; only the industrialists have incentives .towards using profits to create a bigger empire of bricks and steel0. $ewis argues that the subsistence sector, which is mostly associated with the agricultural sector, cannot stimulate development, since the subsistence sector cannot produce reproducible capital. >uring the development process, the incomes of capitalist industrialists will increase, whereas incomes in the subsistence agricultural sector stay relatively stagnant, unless the subsistence sectors start benefiting from the development of the capitalist sector. ,ventually, the emergence of development in the $ewis model is associated with higher urban ine"uality and a rising income gap between urban and rural areas. The development of the capitalist sector will be supported with the labor supplied by the subsistence agriculture sector, which will lead to urbanization as it is claimed by *uznets. As a result, the urban population grows and higher ine"uality will be e!pected at least in the first stage of $ewisian development. $ewis says the subsistence sector could be more productive, if the peasants start to imitate capitalist techni"ues by using new seeds and fertilizers or if they start to benefit from capitalist investments in irrigation, in transport facilities or in electricity. ;owever, in his statement $ewis does not say whether increase in productivity in the subsistence sector will be bigger or less than the increase in productivity in the capitalist sector. Thus,

he does not imply anything about the changing income gap between the urban and rural sectors. ;e only argues that higher productivity of the subsistence sector will lead to higher real wages in the capitalist sector and reduce the capitalist surplus and accumulation. ;ence, $ewis focuses on the relationship between the development of subsistence sector and the income distribution within the capitalist sector. The *uznets process is depicted in some studies by using modeling. The model proposed by -obinson #%&A4) claims that the *uznets process holds even if the rural ine"uality is greater than the urban ine"uality. ;owever, he assumes that both within rural and urban ine"ualities and rural urban income gap are constant, while developing his model. -obinson1s assumption is not applicable for many cases; the changes that may occur in inter and intrasectoral ine"ualities could falsify -obinson1s model. Another model that e!plains the *uznets process is developed by Anand and *anbur #%&&5). Bonsistent with the *uznetsian approach, Anand and *anbur assume that population moves to the urban sector, where ine"uality is larger. The model decomposes the ine"uality into within sector and between sector component. Anand and *anbur first assume that means and the within group ine"ualities of the urban and rural sectors are constant and the change in ine"uality is occurring only due to population shifts. They show that the within sector component should be increased due to the greater population in the more une"ual urban sector and therefore the between sector ine"uality should be reduced for the 2 curve to be formed under their assumptions. ;owever, empirically they show that their assumptions do not hold and the model should allow the sectoral means and sectoral ine"ualities to shift over time. The model concludes that ine"uality changes not only due to the population shifts, but also due to the changes in sectoral means and within sectoral ine"ualities. This result is consistent with the *uznetsian approach that e!plains the mechanisms that reduces urban ine"uality. ;ence, e!plaining the changes in ine"uality merely by urbanization is not enough; the results of urbanization on both sectoral mean incomes and ine"ualities should also be e!plored. Urban$%ural Income &aps The urbanization changes the overall ine"uality in a country by raising the impact of urban ine"uality on the overall distribution. ;owever, the industrialization and

urbanization processes can affect the overall ine"uality not only by shifting the sectoral shares, but also by changing the intra and intersectoral ine"ualities. As a country develops, the intersectoral ine"uality between the urban and rural sectors changes due to first and secondary effects of industrialization. According to *uznets #%&++), the early effects of industrialization could raise the income gap between the urban and rural sectors. In his A,- article, *uznets #%&++) claims that6 .The relative difference in per capita income between the rural and urban populations does not necessarily drift downward in the process of economic growth6 indeed, there is some evidence to suggest that it is stable at best, and tends to widen because per capita productivity in urban pursuits increases more rapidly than in agriculture.0 The intuition behind this argument could come from the $ewis model #%&+=). In $ewis model, the development is mainly driven by the industrial sector. ;owever, $ewis also e!amines the secondary effects of development on the subsistence sector #mainly agriculture). 9irstly, $ewis mentions that the subsistence sector could also increase its productivity by imitating the techni"ues in the capitalist sector. 9or e!ample, peasants could get new seeds or they could use fertilizers for raising their productivities. ;e also says that the subsistence sector could benefit from the capitalist investments like irrigation works, transport, and electricity. $ewis secondly claims that if the capitalist and subsistence sectors specialize in different products #like agriculture and industry), the urbanization could lead to greater demand and relative shortage of agricultural commodities. As a result, the agricultural output will not be enough to feed the industrial workers. The terms of trade will worsen for the industrial sector, which would partially close the urban rural income gap. $ewis also mentions that the terms of trade effect might not be seen, if the capitalist sector invests on agriculture or the productivity in the subsistence sector increases significantly. -anis and 9ei1s #%&4%) arguments in their article .The Theory of ,conomic >evelopment0 could be considered as a complement to $ewis model. In their study, -anis and 9ei claim that .$ewis8has failed to present a satisfactory analysis of the

subsistence or agricultural sector.0 Thus, they propose a more detailed analysis for e!amining the secondary effects of industrialization and urbanization on agriculture. In their model, -anis and 9ei #%&4%) claim that the economy could follow a balanced growth, in which time to time deviations are seen. As in the $ewis model, in the case of overinvestment in the industrial sector, the shortage of food could lead to deterioration of the terms of trade in the industrial sector and industrial wages will rise due to growing food prices. As a result of this, the industrial investments will be discouraged; hence, there will be more incentives to invest on agriculture. Thus, the actual growth path could return to the balanced growth path and the urban rural income gaps could narrow down. The urbanization could also increase the income in rural areas through the remittances. The urban settlers can transfer money to their relatives, which could generate an e!tra income for the rural dwellers #$all, :elod and :halizi, (CC4). -emittances also create an e!tra economic activity in the rural sector, when the new urban settlers spent their income for investments like housing in their origins #;>-, (CC&). Many studies show that remittances increase the level of education and improve health of origin families #7ecker, (CCA). Improved human capital could also contribute to rural productivity positively. There are also studies that show how urbanization can change the ine"uality by altering the land per capita. In fact, many studies #:en, %&&4; /riffin, *han and Ickowitz, (CC() claim that the land productivity might be lower in small scale farms since family farms have advantages in monitoring and effort. ;owever, the migration of rural individuals could still increase the rural income per capita #7ourguignon and Morrisson, %&&'), although it might not lead to higher land productivity, as in the case of shift from small to large scale farming. In addition, urbanization might not lead to a transformation from small to large scale farming. The family farming structure could continue, only the family members that cultivate the land could be reduced due to the migration. In this case, it is more probable that the rural income per capita will increase with urbanization. :tiglitz #%&'() also focuses on increases in agricultural productivity; however, he makes an alternative interpretation by using his efficiency wage model. According to :tiglitz, the migration of a family member changes the marginal product of the other

members that stay in the rural sector. If output is proportional to effort, e"ual share of output between many family members could reduce output by lowering incentives for supplying effort. This might cause a loss of efficiency in agricultural production. In such cases, the migration of an individual within the rural family could increase the efficiency by bringing better incentives to the peasants for supplying more effort. Therefore, migration process could close the urban rural income gaps by not only increasing average rural incomes, but also by raising total productivity in the planted areas. 'ithin Inequality In his article, *uznets #%&++) also claims that the ine"uality will decrease in the later stages of development. ;owever, unlike the studies mentioned above #-anis and 9ei , %&4%; 7ourguignon and Morrisson, %&&'; :tiglitz, %&'(), *uznets focuses on the changes in urban ine"uality rather than the narrowing intersectoral income gap. ;e uses the long term effects of urbanization for making his analysis and perceives urbanization as a process that would reduce ine"uality in the long run. According to *uznets, raising ine"uality will be narrowed, mostly due to the declining ine"uality within the urban groups. *uznets claims that, within years the economic positions of new urban dwellers and their descendants improve. The social mobility e"ualizes economic differences, and hence ine"uality follows a declining path. The mechanism behind the social mobility is e!plained by *uznets. 9irstly, as the development process continues a larger share of the urban population becomes .native0 urban dweller. Thus, a larger proportion of population benefits from the advantages of the city life. :econdly, in democratic societies the growing political power of the lower income groups resulted in changing legislation and new policies that counteracts against the negative conse"uences of rapid industrialization and urbanization. Thirdly, the forces of .freedom of individual opportunity0 enable development of new fields that bring opportunities for new entrepreneurs. Dew and profitable industries will be run by the new entrepreneurs, unless the descendants of upper income groups do not shift to the new industries. ;owever, *uznets says that .the successful great entrepreneurs of today are rarely sons of the great and successful entrepreneurs of

yesterday0. Therefore, *uznets claims that the development of new industries stimulates social mobility by creating opportunities for different income groups. $astly, the improvement of the service sector reduces income ine"uality. The service sector is e!pected to grow as a result of the development process and rising />E. In the earlier stages of development, the proportion of workers in industrial sector increases as the proportion of workers in agriculture declines. ;owever, as economic growth continues the services sector starts to e!pand, while the agricultural sector continues to decline #:yr"uin, %&''). According to *uznets, the growth of the service sector decreases ine"uality for several reasons. 9irst, *uznets argues that service incomes are mostly earned due to the individual e!cellence; thus, the higher levels of service incomes are not necessarily pursued by the descendants of the wealthier individuals. *uznets also claims that the possibilities of rising income are limited for people who are already in high income occupations. ;ence, incomes of the lower income workers in services are more likely to increase. Therefore, incomes are e!pected to be more e"ual within the services sector compared to industry. In summary, *uznets e!plains the change in income distribution as increasing in the first stage of development and declining in the later stages. 3ith this e!planation, *uznets describes an inverse 2 curve relation between income and ine"uality. 2rbanization is pursued together with industrialization; therefore, migration from rural to urban areas inherently increases ine"uality by raising the proportion of population of the more une"ual part of the country. As the development process continues the income ine"uality declines, due to the factors like social mobility and improving service sector. There are many e!tensions and criticisms that could made for *uznets1s arguments on urban ine"uality. 9irstly, the pace of social mobility is highly related with structural factors in the urban sector. Amongst the structural factors, the distinction between the urban formal and urban informal sectors could be considered as important. 9or e!amining the migration process, unlike ;arris and Todaro #%&AC), Bole and :anders #%&'+) use a model that distinguishes the urban modern and urban subsistence sectors. According to Bole and :anders #%&'+), it is more likely that the new arrivals would enter to the urban subsistence sector #mostly informal), in which barriers to

employment are few and average income is lower compared to the urban modern sector. Many other studies #7enar?ee, %&'5; -auch, %&&5) claim that wages in the urban informal sector are e"ual to or slightly higher than the rural wages. ;owever, the many migrants shift to the urban informal sector, preserving their hopes for finding a formal ?ob in future. The shares of informal formal sectors change during the different phases of urbanization. According to -auch #%&&5), the share of being .underemployed0 in the informal sector follows an inverted 2 path as the economy urbanizes. $ikewise the .Todaro parado!0, the growth of the urban formal sector attracts rural workers and leads to a greater growth in the urban informal sector. ;owever, as urbanization proceeds, pressure on the land decreases and the agricultural income rises. The agents become less willing to leave the rural sector and be .underemployed0 in the informal urban sector. Thus, the share of informal urban sector employment will start to decline. :ince, the wages are generally lower in the urban informal sector; the inverted 2 curve of the informal urban sector share could also form an inverted 2 curve between the level of urbanization and within urban ine"uality. The migrants could enter to the informal and formal sectors due to several factors. A study made for 7olivia #Eradhan and Fan :oest, %&&5) show that the education level is an important determinant of entering the formal sector. Eradhan and Fan :oest show that factor like ethnicity and unemployment in the region are also important for determining the possibility of participating in the formal sector. $ikewise in 7olivia, in India the education level is also an important factor for rising migrants1 possibility of being employed in the formal sector #7aner?ee, %&'5). The migrants with intermediate and higher level of education have a greater chance of getting employed in the formal sector. As e!pected, in many countries the return of education is also found to be higher in the formal sector #Eradhan and Fan :oest, %&&5; 7aner?ee, %&'5; 9unkhouser, %&&A). The growth of the informal sector could raise the urban ine"uality; however, the ine"uality could be reduced if there is a significant social mobility between the formal and informal sectors. Devertheless, the social mobility might not be high for many cases. 7aner?ee #%&'5) shows that in %&A41s >elhi only (=G of those who entered the informal sector on arrival was switched to the formal sector. ;e also shows between the years

%&4+ %&A+, only + %+G of the new arrivals were switched to the formal sector in a year. In addition, the potential mobility was found to be low; only %+G of the informal sector wage employees and %(G of the non wage workers were actively looking a ?ob in the formal sector. The network of between the agents is important for enabling the mobility between the formal and informal sectors. In India, 4CG of migrants who moved from the informal to the formal sector found out their current ?ob with the help of their relatives and friends. The level of education is again found to be an important factor of mobility. The informal sector employees who have a middle school or intermediate college level education have a greater likelihood of shifting to the formal sector. In summary, along with the other factors the access to education is an important factor for enabling the social mobility and reducing the urban ine"uality. The migrants or the children in the migrant families should have an access to an education to secondary or tertiary education for the process depicted by *uznets to happen. @ne impediment of that is the usage of children as a labor force in the informal sector. Many of the children in the migrants1 families work #Acikalin, (CC'), they cannot have an access to higher level of education. Also, the "uality of the education that some children get is e!tremely low even for the primary school level, since they could not have time to focus on their school, while they are working. Another e!tension that could be made to the *uznetsian theory is related with the services sector. As we mentioned previously, *uznets claims that the growth of services sector would reduce ine"uality, since the ine"uality in the services sector is lower compared to the industrial sector. The arguments of *uznets on services are mostly relevant for the service sectors of %&+C1s. ;owever, the relations of production are significantly changed in many of today1s service sectors; employer employee type of relations improved, whereas the proportion of self employed is declining. Also, improvements on branding and franchising also created new opportunities for increasing the incomes of the wealthier individuals in the service sector. Therefore, the difference between the levels of ine"uality within the industrial and service sectors may not be great in today1s world, due to the developments in the services sector.

The property income is another issue that might create a need for the revision of *uznets1s theory in today1s world. In fact, in his article .Huantitative Aspects of the ,conomic /rowth of Dations0, *uznets #%&45) shows that .the shares of property in total income are lower in the less developed regions8 they would tend to widen ine"uality less in the low income, underdeveloped regions than in the developed regions0 in the 2nited :tates. The current literature on financialization also signs that the situation depicted by *uznets might be true for the country wise comparisons. The 2: economy has the highest />E per capita compared to other large scale countries%. 9ollowing the economic growth, the share of financial income has also risen in the 2: economy #*rippner, (CC+; Brotty, (CC&). The share of financial and real estate incomes reached to the level of (5G in (CC% and it continued to rise afterwards. In his empirical study, 9razer #(CC4) finds a modified inverted 2 curve with ine"uality rising after an income level. This result could be partially related with the higher urban ine"uality caused by the rising share of property incomes in the high income countries. In his %&++ article, *uznets does not focus on the changes in rural ine"uality. ;e e!plains the reduction in ine"uality ma?orly by the changes in the urban ine"uality. ;owever, in his %&45 *uznets develops an argument on the changes in rural ine"uality. ;e claims that6 .The rise in productivity within the A sector, indispensable for modern economic growth, may have been associated with technological changes that raised the scale of production on farms and introduced a cleavage between the large commercial farms in the progressive part of agriculture and the small units lagging behind, which would make for wider ine"uality of income within the A sector, at least until the process of modernization had been introduced throughout the sector.0 The technological improvements could increase the rural ine"uality for a period of time. As it happened in Ehilippines during the green revolution #7oyce, %&&5), the
%

In fact, the 2nited :tates has the si!th largest />E per capita in the world #IM9, (C%C). ;owever, the top five countries Hatar, $u!embourg, :ingapore, Dorway and 7runei have a population smaller than + million; they could be considered as small scale if we use population as a criterion.

.technological improvements0 in agriculture might even lead to the centralization of land and would make the higher rural ine"uality permanent. ;owever, in some cases the small scale farms can also compete with the large scale farms that are technologically developed. In fact, many recent studies #:en, %&&4; /riffin, *han and Ickowitz, (CC() show that the small scale farms could have higher land productivity. It is true that the small scale farms could be technologically behind; however, the small scale farms have advantages on monitoring and effort. The large scale farms owned by absentee owners and cultivated by hired workers under supervision of a manager are often considered as inefficient. These farms have high monitoring costs and the effort shown by the workers is usually lower compared to the family farms. Also, the proportion of uncultivated land is higher in the large scale farms. In summary, the small scale farms can compete with the large scale farms; the technological improvements followed by growth might or might not lead to a permanent rise in the rural ine"uality. $astly, successful land redistribution could play an important role on changing the rural ine"uality. The rural ine"uality would be significantly reduced, if land is redistributed during the development process #/riffin, *han and Ickowitz, (CC() (he cases of higher rural inequality 9or developing his argument, *uznets #%&++) assumes that in any condition ine"uality in urban areas is larger than the ine"uality in rural areas. ;e says that 0It seems most plausible to assume that in earlier periods of industrialization, even when the nonagricultural population is relatively small in the total, its income distribution was more une"ual than that of the agricultural population.0. Therefore, the population shift from relatively e"ual rural sector to une"ual urban sector will firstly result in widening ine"uality. The arguments of *uznets could be challenged within his own conte!t, for the cases in which *uznets1s assumptions do not hold. In some countries, the socioeconomic structure could create cases that the rural population is more une"ual than the urban population. In such cases, urbanization means shift to relatively egalitarian areas. ;ence,

urbanization could lead to a reduction in overall ine"uality, before the effects of social mobility is observed.

Table - 1: The Income Inequalities in some countries Rural Gini Urban Gini Total Gini Argentina 1953 0.50 0.38 0.41 Argentina 1961 0.49 0.48 0.43 Bolivia 1996 0.59 0.51 0.57 Bolivia 1999 0.63 0.48 0.58 China 198 0. 3 0.1 0. 9 China 1986 0. 6 0.16 0.33 China 1991 0.31 0.18 0.38 Co!ta Ri"a 1961 0.53 0.47 0.50 Co!ta Ri"a 1981 0.47 0.43 0.48 Co!ta Ri"a 1991 0.44 0.43 0.46 #or$an 1980 0.38 0.34 0.41 %igeria 1975 0.43 0.36 & 'ierra (eone 1968 0.60 0.5 0.60 Tur)e* 1968 0.57 0.50 0.56 Tur)e* 1973 0.5 0.46 0.50 U'A 1957&59 0.4 0.35 & U'A 1960&6 0.4 0.35 0.36 +ene,uela 196 0.45 0.44 0.54 :ources6 Argentina %&+5, %&4%; 2:A %&+A +&, 2:A %&4C 4( < 3eisskoff -.#%&A4), ,ncome distribution and economic gro th in -uerto .ico, Argentina and /e)ico 7olivia %&&4, %&&&; Bosta -ica %&'%, %&&%; Digeria %&A+; < 2D23I>,- #(CC'), 3orld Income Ine"uality >atabase F(.Cc Bhina %&'(, %&'4, %&&%; Bosta -ica %&4%; Iordan %&'C; :ierra $eone %&4'; Fenezuela %&4( < >eininger *. and :"uire $. #%&&4), .A Dew >ata :et Measuring Income Ine"uality0, 0orld 1an$ 2conomic .evie F. %C, Do 5 Ep. +4+ +&% Turkey %&4' 7ulutay,T., Timur,:.and ,rsel,;.#%&A%),TJrkiye1de /elir >aKLlLmL, Ankara6:79. Turkey %&A5 :E@ #%&A4), /elir >aKLlLmL %&A5, Ankara

@ne ob?ection to this argument could be brought by -obinson #%&A4). According to -obinson, the 2 curve will be formed even in the condition, where rural ine"uality is higher. ;e shows that the parabolic relation between ine"uality and income will be formed in any case as long as the shift of population from rural to urban sector continues. ;owever, in his model -obinson assumes that both within rural and urban ine"ualities and income gap between urban and rural sectors are constant. 3e have no rational reason to believe that these measures will stay constant during the development process, in fact

empirically -obinson1s assumption is disproved #Anand and *anbur, %&&5). The within ine"ualities or the rural urban income gap could change as the development process continues. In the cases where the within rural ine"uality or the rural urban income gap are consistently declining, the parabolic relation between income and ine"uality might not e!ist. In addition to that, there is a greater chance of the 2 curve not to be formed, if rural ine"uality minus urban ine"uality is larger. Table % shows some cases where the ine"uality is larger for the rural population. There could be several reasons of higher rural ine"uality depending on the structural conditions of the country. In most of the cases, the high rural ine"ualities are caused by une"ual land distribution. 9or e!ample, in the cases of Fenezuela and Bosta -ica where higher rural ine"ualities were observed, the /ini coefficients of land concentration for the early %&AC1s are estimated as C.'( and C.&% respectively #@tsuka, Bhuma and ;ayami, %&&(). The higher rural ine"uality within the 2nited :tates is realized by *uznets as an e!ceptional case. According to *uznets #%&45), the higher ine"uality in rural areas could be related with the une"ual distribution of income in the rural :outh and 3est, .the former because of the cleavage between Degroes and whites, and the latter because of the cleavage between large scale, capital intensive farms and smaller units0. Thus, *uznets e!plains the high rural ine"uality in the 2:, both with the e!tending effects of slavery and the large scale agricultural production. (he (ur#ish case The high rural ine"uality, which was observed in %&4'1s and %&A51s Turkey was an inheritance of economic structure in @ttoman ,mpire. In fact, the traditional relation of production in @ttoman ,mpire is defined as an Asiatic mode of production by many scholars #>ivitMioKlu, %&4A), since most of the surplus was e!propriated by agricultural state ta!es. ;owever, starting from the eighteenth century, a landlord class developed from the local ta! collectors and state officers. The formation of this structure led to greater land ine"uality and the emergence of semi feudal relations of production. The traditional relations of production in @ttoman ,mpire is e!plained by the timar system. According to the timar system, the sipahis #cavalrymen) had the privilege

of collecting land surplus in from of ta!es. In e!change, they gave support to the @ttoman army #Islamoglu N *eyder, %&'A). ;owever, it must be noted that the timarholders were not the owners of the land and the privilege of being timarholder was not surely inherited by the other generations. The sultan, in fact, could take the privilege of holding timar freely. :ince all of the timars were given by the sultan directly, the timarholders rarely transformed into feudal landlords #>ivitMioKlu, %&4A). Therefore, many scholars like >ivitMioKlu claims that the timar system is a form of Asiatic mode of production rather than being a form of feudal mode of production. >uring the si!teenth century, as a result of decreasing revenues and increasing e!penditures, the @ttoman state faced with a fiscal bottleneck #Islamoglu N *eyder, %&'A). 9or overcoming the fiscal bottleneck, the @ttoman state leased out the privilege of collection of ta!es. The collection of ta!es was issued to the ta! farmers who were mostly state officers. This led to a crucial change in the relations of production. The leaseholders started to substitute the state and inclined to ma!imize their share of production and s"ueeze peasants #reaya) to achieve their goals #Inalcik, %&&%). ;owever, under a short lease, ta! farmers aimed short term ma!imization, which resulted in the ruin of the area. Therefore, @ttoman state introduced the mali$ane system, in which collection of ta!es is issued to ta! farmers on a life time basis. The formation of the mali$ane system naturally led to the development of semi feudal relations of production within the rural areas. In addition to mali$ane, plantation like large scale farms called 3iftli$s emerged during the eighteenth century #Inalcik, %&&%). According to the ciftli$ system, large, waste or abandoned lands were issued to the local notables with influence and wealth. The aim of this operation was land reclamation; therefore, the beneficiaries had to make necessary investments such as irrigation works #Feinstein, %&&%). 3iftli$s became the farms that were economically motivated to ma!imize the revenues under the impact of growing ,uropean demand. The labor force was formed by landless peasant, who worked in ciftli$ lands as paid agricultural workers or sharecroppers. In ,astern Anatolia, ownership of some sanca$s #administrative unit in @ttoman ,mpire) were given to local tribal leaders called beys, who in e!change paid a certain amount of ta! and provided soldiers to the state in the necessary conditions #Aydin, %&'4). The lands of beys were inherited by their children, and the state could not dismiss

the local bey or appoint a new bey to the sanca$. Thus, a form of semi feudal relations of production was observed in ,astern Anatolia. After the si!teenth century, weakening of @ttoman state led to @ttoman state1s loss of control over these lands and beys took almost total control of the land. The development of the relations of production in @ttoman resulted in a great ine"uality in land distribution. The agricultural survey of %&%( %&%5 e!hibits the e!tent of land ine"uality during the last age of @ttoman ,mpire. The survey shows that +G of rural households, who were mostly feudal landlords or agas #owners of the villages), were holding 4+G of the land. 'G of rural households were landless and the rest of the 'AG of rural households only had 5+G of the total land #*oymen, (CC'). After the foundation of Turkish -epublic in %&(5, many of the ta! collectors #multezims) lost their economic power due to several reasons. In %&(+, the ta! collecting system was modernized. In addition with the acceptance of private property in land in %&(4, some of peasants who proved that they were the users of the land became the real owners of the land, which were previously controlled by multezims #Aydin, %&'4). ;owever, the land ine"uality still continued during the early period of the republic. The agricultural survey of :tate :tatistical Institute shows that in %&(A, A4G of peasants only owned AG of the total land #*oymen, (CC'). The data for %&+C and %&AC also e!hibits that land ine"uality e!isted during the following periods #Table ().
Table 2: Regional Land Distribution in Turkey (19 !"19#!$ 19 ! -i$north 0.63 Aegean 0.76 -ar.ara 0.47 -e$iterranean 0.93 %orthea!t 0.58 'outhea!t 0.80 Bla") 'ea 0.47 -i$ea!t 0.66 -i$!outh 0.74 T%R&'( :ource6 2nal #(CC') !)#*

19#! 0.57 0.54 0.53 0.64 0.59 0.70 0.53 0.57 0.59 !)+2

:ome scholars like Baglar *eyder #%&'5, %&'&) claim that Turkish agriculture has historically characterized by the predominance of independent small scale peasantry and landless peasantry do not constitute a crucial category within the rural society. It is true that most of the peasants in Turkey had a land; however, at least until %&ACs, the scale of land that peasants owned was very small. According to the agricultural survey of %&AC, A+.%G and ='.(G of farms were smaller than +C and (C decares respectively. *oymen #(CC') claims that production level below +C decares insufficient for sustaining a life above the poverty level. Therefore, although most peasant owned a land, a large amount of peasants were either living below the poverty line or were enrolling in other activities #sharecropping, seasonal work, husbandry etc.) for sustaining a reasonable income level. %&AC agricultural survey also shows that 5.(G of rural households owned =%.AG of total land, which again e!hibits the e!tent of high rural ine"uality. It might be reasonable to assume that many of the unregistered land were not declared in agricultural surveys. ;owever, according to Aydin1s #%&'4) field study, de facto owners of undeclared land were mostly large landowners. Thus, we can claim that undeclared lands result in a downward bias in the calculations of rural ine"uality. @ne of the reasons of high rural ine"uality was the semi feudal structure that even still e!ists in :outheast Anatolia. 3ith the acceptance of private property in land in %&(4, multezims lost their influence in :outheast Anatolia; however, tribal leaders and big land owners #beys) who were the de facto owners of land became the de ?ure owners called agas #Aydin, %&'4). Agas are not only the landowners; they have influence over peasants beyond their economic power. Eeasants serve as corvee laborer and they have to do all kinds of duties issued by aga. If they refuse to do orders, aga would either e!pel them from village or mistreat them. Eeasants cultivate agas1 land usually by different forms of sharecropping agreements; however, landless agricultural laborers also work in agas1 lands as wage laborers. Another reason for the high rural ine"uality in Turkey could be the privileges, which were given to large scale landlords during the early periods of the republic. >uring %&(C1s and %&5C1s, mostly large landowners benefited from the credits given by the state owned commercial bank Oiraat 7ankasi. $arge landowners1 privileges on reaching credits encouraged the usury activities. In many cases, large landowners could get a loan

with reasonable interest rates and lend this money with interest rates that reached to the levels of %(C 4CCG. According to 7oratav #%&4&), through the usury activities, the usurer e!propriated an important part of small scale peasant1s surplus. *oymen #%&'%) claims that usury activities also changed land distribution significantly. Many of the peasants who cannot pay their loans had to sell their land to large landowners. After the :econd 3orld 3ar, the Turkish government started to use the Marshall Elan aid to finance the importation of agricultural machinery. The number of tractors ?umped from (CCC in %&=' to =(CCC at the end of the %&+Cs. The aid was distributed through state owned commercial banks for encouraging tractor purchases; however, mostly large landowners benefited from these loans. 7y %&45, poorer 4'.'G of farms only had (CG of tractors; whereas, the richest C.+G owned (4G of tractors #*oymen, (CC'). The une"ual distribution of tractors was one of the reasons of high rural ine"uality, which was observed in %&4' and %&A5 surveys. A )imple mo!el for e*plaining the Kuznets process The *uznets process in Turkey can be e!plored by decomposing ine"uality to its components. /ini Inde! is the most commonly used inde! in ine"uality analysis. ;owever, for a decomposition analysis, Theil Inde! could give stronger results compared to /ini Inde!. The reason for that is that /ini Inde! cannot be fully decomposed into between and within components. Along with between and within components, the decomposition of /ini inde! gives an e!tra .intensity of transvariation0 term #>agum, %&&A); whereas Theil inde! can be decomposed into between and within components without having a residual term. Therefore, for this analysis Theil Inde! is preferred for more accurate decomposition of ine"uality. 7y using Theil Inde!, the overall ine"uality T can be decomposed into within and between sector components T0 and T1 in the following way6 #%)

T = T0 + T1
9or e!ploring the *uznets process, we assume that both within and between

components are dependent on population share of urban sector, which is defined as !. The overall ine"uality can be rewritten by decomposing within component into urban and rural components TU and T.6

#()

T = TU # )) .U # )) + T. # )) .. # ) ) + T1 # ) ) = TU # )) .U # )) + T. # ))#%- .U # ) )) + T1 # ) )
;ere .U and .. are respectively production shares of urban and rural sectors in the

whole economy. It could be reasonable to assume that share of production increases with the rise in urban population. 9or analyzing the impact of urbanization on overall ine"uality, we calculate first order conditions of T with respect to urban population share #!)6 #5)

T = TU P .U + TU .U P+ T. P#%- .U ) - T. .U P+ T1 P )

:ince .U&)( 4 - ..&)(, the e"uation could be written as6 #=)

T = .U P#TU - T. ) + #TU P .U + T. P .. ) + T1 P )
The e"uation above gives an insight about the development process e!plained by

*uznets #%&++). *uznets assumes that urban sector has always higher ine"uality compared to rural sector. ;e claims that moving from relatively e"ual urban distribution to relatively une"ual rural distribution increases the ine"uality in the early phase of development. This argument can be seen in the first and third terms. The first term is naturally positive, if urban ine"uality is greater. The between ine"uality component # T1) also increases in the first phase of development. Anand and *anbur #%&&5) show that the relation between share of urban population #!) and between ine"uality component # T1) is inverse 2 shaped even, if the urban rural mean income gap is constant. The reason for that is that the contribution of between ine"uality converges to zero in the economies that are totally urban or rural #9igure %). In addition to that, *uznets claims that the productivity gap between the rural and urban sector increases in the first phase of development. Anand and *anbur show that if *uznets1s assumption is followed the peak of 2 curve gets greater and the slopes at the end points become even steeper. Therefore, T11#!) Q C assumption is valid for e!plaining *uznets1s theory, when the value of ! is smaller. Therefore, assuming that within rural and urban ine"ualities are not declining, growth of urban sector surely raises ine"uality in the early stage of development. As the development process continues, for higher values of !, both .U1 R C and T11#!) R C

conditions would be satisfied. This would lead to a decline in overall ine"uality and the development process would fit to *uznets Burve.
+igure $,: Change in Inequality in the Kuznets -rocess

Ine"uality #T)

3ithin group component #Tw)

7etween group component #Tb)

2rban share of population #!)

:ource6 Anand, :. and *anbur, :.M.-.#%&&5) .The *uznets process and the ine"uality development relationship0. 5ournal of 6evelopment 2conomics , =C, pp. (+<+(

;owever, the interpretations of *uznets Burve could change for the conditions in which rural sector is more une"ual or urban and rural ine"ualities decline with the growth of urban sector. In these cases, the following condition can be satisfied for all ! values and the overall ine"uality could consistently fall down. #+)

T = .U P#TU - T. ) + #TU P .U + T. P .. ) + T1 P < C )

The condition above might e!plain the ine"uality in Turkey #9igure (). The income distribution statistics for Turkey show that ine"uality in Turkey has a downward trend during the industrialization period #Table 5). The first statistic presenting urban and rural ine"uality is the statistic for the year %&4'. >uring %&4', urban share of population was 54.'G. The urban share of population consistently rose after %&4'; it reached to =5.&G in %&'C, +5.CG in %&'+ and +&.CG in %&&C. ;owever, the rapid growth of urban sector did not seem to lead to a systematic increase in ine"uality.

+igure $.: Change in Inequality in a society with higher rural inequality

Ine"uality #T)

3ithin group component #Tw) 7etween group component #Tb)

2rban share of population #!)

In Turkey, firstly, rural ine"uality was greater than urban ine"uality in the years %&4' and %&A5. Thus, une"ual urban sector assumption of *uznets does not hold for Turkey and there was a movement from une"ual to e"ual sector. ;ence, the first term of e"uation #+) was negative for a period. :econdly, ine"ualities in the urban and rural sectors changed. The ine"uality in the urban sector did not rise with urbanization #e!cept the year of economic crisis %&&=) and a significant decline was observed for the rural ine"uality. Thus, the second term of e"uation #+) is probably negative. These two conditions reduce the T T and hence can be negative even when the urban sector is ) )

rapidly growing. Thus, the Turkish case shows that *uznets process might not hold if *uznets1s assumptions are changed. 3e can e!plain the changes in long term Turkish ine"uality by using a simple empirical analysis. 9or the empirical analysis, the Theil entropy indices for the years %&4', %&A5, %&'A and (CC= are calculated #Table < =). The years %&4', %&A5 and %&'A were selected for calculations, since the first three relatively reliable income distribution surveys were done for these years. The ine"uality for %&45 was not being estimated by household surveys, it was rather calculated by using the land distribution estimated in agriculture surveys and the values of income ta!es and social security premiums paid.

Thus, %&45 income distribution study cannot capture the informal economy. The years %&&= and (CC( were not used for calculations, since the ine"uality for these years are biased, due to the effects of the economic crises in %&&= and (CC%. I rather used the year (CC=, which does not reflect the short term effects of economic crises on distribution. Theil values for %&4' and %&A5 were estimated by using the income distribution data of 7ulutay, Timur and ,rsel #%&A%) and :tate Elanning @rganization #%&A5) respectively. 9or the years %&'A and (CC=, data of Turkish :tatistical Institute :tatistics as used.
Table - *: Inequality in Turkey ,ini - Total ,ini - %rban ,ini - Rural 19+* 0.55 & & 19+0.56 0.50 0.57 19#* 0.50 0.46 0.5 19-# 0.43 0.44 0.4 199. 0.49 0.51 0.41 2!!2 0.44 0.44 0.4 2!!* 0.4 0.4 0.39 2!!. 0.40 0.39 0.37 2!! 0.38 0.38 0.37 2!!+ 0.43 0.4 0.41 2!!# 0.41 0.39 0.38 2!!0.41 0.40 0.38 :ources 6 %&45 SavuToKlu, T., and U. ;amurdan#%&44), /elir >aKLlLmL AraTtLrmasL %&45, :E@, Ankara. %&4' 7ulutay,T., Timur,:.and ,rsel,;.#%&A%),TJrkiye1de /elir >aKLlLmL, Ankara6:79. %&A5 :E@ #%&A4), /elir >aKLlLmL %&A5, Ankara %&'A < :I: #%&&C), %&'A ;anehalkL /elir ve TJketim ;arcamalarL >aKLlLmL :onuMlarL, Ankara %&&= < :I: #%&&4), %&&= ;anehalkL >aKLlLmL Anketi :onuMlarL, Ankara (CC( (CC' < T2-*:TAT, ;ousehold Income >istribution :tatistics #www.tuik.gov.tr)

:tate Institute of

Table - .: Decom/osition o0 inequality according to urban-rural segmentation %rban 1o/)(2$ ,ini Theil - Total Theil - %rban Theil - Rural Theil - 3et4een 19+36.8 0.56 0.664 0.519 0.685 0.056 19#* 40.4 0.50 0.5 7 0.46 0.557 0.015 19-# 55.3 0.43 0.375 0.39 0.3 9 0.009 2!!. 68.0 0.40 0. 93 0. 84 0. 63 0.014

Table = e!hibits Theil values for within and between urban rural ine"ualities in Turkey. According to the analysis, the ine"uality between rural and urban areas has only small impact on the overall ine"uality. The ine"uality for the given years is mostly e!plained

by the within ine"ualities in urban and rural areas. Therefore, change in overall ine"uality is mostly related with change in within ine"uality. The reasons behind the reduction in ine"uality could be predicted by the e"uation =6 #=)

T = .U P#TU - T. ) + #TU P .U + T. P .. ) + T1 P )
9or estimating impact of the first term # .U P#TU - T. ) ), which we call *uznets

effect, we assume that gap between within urban and rural ine"ualities move towards one direction between the given years. Thus, we multiply rate of urbanization with the higher and lower differences between within urban and rural ine"ualities for the given period. 7y this method, we find a range showing the possible contribution of *uznets effect on overall ine"uality. The second # TU P .U ) and third # T. P .. ) terms give impact of changes in urban and rural ine"ualities on overall ine"uality. 9or calculating the range of second and third terms, we again assume that these terms move towards one direction between the given years. 3e multiply the rate of urbanization with the larger and smaller values of within urban and rural ine"ualities for the given period. $astly, we estimate impact of the change in between ine"uality # T1 P ) by a simple subtraction.
Table - : Decom/osition o0 changes in Theil 5alues 6hange in 1eriod &u8nets '00ect 6hange in %rban 75erall Theil 19+--19#* &0.1 9 &0.006 &0.003 &0.0 1 &0.0 3 19+--19-# &0. 89 &0.031 0.01 &0.047 &0.070 19#*-19-# &0.160 &0.014 0.009 &0.0 8 &0.039 19-#-2!!. &0.08 0.007 0.003 &0.060 &0.073

6hange in Rural &0.081 &0. 5 &0.135 &0.0 9 &0.077 &0.158 &0.101 &0.0 1

6hange in 3et4een &0.041 &0.047 &0.006 &0.014

Table + e!hibits the decomposition of changes in overall Theil inde! for the given periods. The first values for the *uznets effect .U P#TU - T. ) and impact of changes in within urban # TU P .U ) and rural # T. P .. ) ine"ualities are calculated by using the conditions of the previous year and the second values are calculated by using the conditions of the latter year.

The results show that the path suggested by *uznets was not followed in the Turkish case. The direct effect of urbanization on ine"uality was slightly negative for the period %&4' %&A5, since the rural ine"uality was higher for this period. 9or the period %&A5 %&'A, the value of *uznets effect is between C.C%= and C.CC&. The rural ine"uality was relatively higher in %&A5; however, for %&'A the rural ine"uality was lower. Therefore, for the period %&A5 %&'A, we can say that the urbanization first had direct negative and then had direct positive impact on the Theil value. In summary, the shift from rural to urban areas did not directly increase the overall ine"uality during the early phase of industrialization. The estimations also e!hibit that the long run reduction in ine"uality is highly related with the decline in rural ine"uality. The rural ine"uality was significantly reduced between %&4' %&'A. The decline in rural ine"uality could be e!plained by several reasons. 9irstly, a large proportion of migrants came from either small landowning or landless families(. The migration of landless peasants could immediately have reduced the rural ine"uality by logic, since the poorest individuals left the rural distribution without transferring any assets to the richer ones. In addition, the benefits like remittances accruing to migrants1 families or relatives would probably have pulled the level of rural ine"uality down. Thus, urbanization could have an indirect impact on the reduction of rural ine"uality. :econdly, a spillover in agricultural technology was observed after %&4Cs. In %&4A1s Turkey, there were only A+CCC tractors. These tractors were mostly owned by a privileged group of large landowners #*epenek N Uenturk, (CC+). ;owever, the number of tractors in Turkey increased to %54CCC in %&A( and ?umped to 4++CCC in %&'' and 'A+CCC in %&&A. The spillover of agricultural technology could have positive effects on rural ine"uality. Tables = and + also show that urban ine"uality slightly decreased between %&4' %&A5 and %&A5 %&'A, although urbanization process continued. The decline in urban
(

In a study made for Turkey, *arpat #%&A4) shows that most migrants e!plain their decision by push factors like low soil productivity, lack of good cultivable land, irrigation, water, division of properties into small parcels etc.. AAG of men and 4+G of women migrants e!plain their behavior by push factors related with poverty, whereas only 'G of men and AG of women give .search for a better future0 as their reason for leaving village. Aydin #%&'4)1s field study also shows that the migrants in :outheast Anatolia were mostly poorer individuals.

ine"uality for the %&4' %&A5 period could easily be e!plained by the rising labor movements #7oratav, (CC+). As a result of the labor movements, wage share in manufacturing industry increased from (+.(G in %&4' to (A.%G in %&A5 and 5'.5G in %&A&. ;owever, the gains of labor movements were mostly lost with the anti labor policies followed after the %&'C military coup. Therefore, labor movements cannot e!plain the decline in urban ine"uality for the periods %&A5 %&'A and %&'A (CC=. The decline in urban ine"uality for these periods could be partially e!plained by the .social mobility0 effects suggested by *uznets #%&++) for the later stages of development. As suggested by many scholars #Bole and :anders, %&'+; -auch, %&&5; *arpat, %&A4), it is reasonable to assume that most of the migrants first moved to the informal sector. Thus, ratio of non agricultural labor with social insurance was only =5.'G in %&4A and =(G in %&A( #*epenek and Uenturk, (CC+). ;owever, in time, workers in informal sector moved to the formal sector; the non agricultural labor with social insurance increased to AC.&G in %&&C and A+.&G in (CC=. The raise in the ratio of formal workers could have decreased the urban ine"uality. $astly, between ine"uality declined during the e!amined periods. The impact of decline in between ine"uality is more noticeable for the %&4' %&A5 period. This result is consistent with >ervis and -obinson #%&'C)1s analysis. >ervis and -obinson show that the *uznets -atio in Turkey declined between %&4' %&A5, since terms of trade changed in favor of the rural sector. 9ollowing $ewis #%&+=)1s argument, we can say that the relative growth of the capitalist sector could have shifted the terms of trade in favor of the rural sector and reduced the between income ine"uality in Turkey. Conclusion This study e!plores the effects of urbanization on the changes in income distribution. The changes on ine"uality are analyzed within the *uznetsian framework and *uznets1s 2 curve argument is e!amined in a critical way. The urbanization followed by industrialization can change ine"uality by many ways. As urbanization continues, the urban share raises; changes are observed both in between and within urban and rural ine"ualities. *uznets brings some e!planations on how development changes the

structure of ine"uality. ;owever, the path that ine"uality will follow is also related with the internal dynamics of a country. *uznets claims that the first stage of industrialization increases ine"uality by raising the proportion of the population in the une"ual part #urban) of the society. ;owever, there are indeed studies that show that urbanization has counterbalancing effect against the income gaps caused by the rapid industrialization. *uznets1s assumption on higher urban ine"uality could also be wrong for many cases, which could disprove *uznets1s arguments within his own framework. There are in fact cases shown in this study, where the ine"uality in the rural areas is greater due to the countries1 socioeconomic structure. In this study, we e!amined the Turkish case in which rural ine"uality was greater at the earlier stages of development. 2nlike *uznets1s arguments, urbanization did not lead to greater ine"uality during the first stage of Turkey1s development. The direct impact of shift from rural to urban sector on ine"uality was not negative for the early phase of urbanization. In fact, urbanization reduced the ine"uality in Turkey by decreasing the rural ine"uality and closing the urban rural income gap. The reduction in ine"uality pursued during the latter stages of development with the .social mobility0 effects suggested by *uznets.

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