Lopez, J. HumbertoServén, Luis2012-06-222012-06-222006-01https://hdl.handle.net/10986/8791Using a large cross-country income distribution dataset spanning close to 800 country-year observations from industrial and developing countries, the authors show that the size distribution of per capita income is well approximated empirically by a lognormal density. The 0 hypothesis that per capita income follows a lognormal distribution cannot be rejected-although the same hypothesis is unambiguously rejected when applied to per capita consumption. The authors show that lognormality of per capita income has important implications for the relative roles of income growth and inequality changes in poverty reduction. When poverty reduction is the overriding policy objective, poorer and relatively equal countries may be willing to tolerate modest increases in income inequality in exchange for faster growth-more so than richer and highly unequal countries.CC BY 3.0 IGOABSOLUTE VALUEAGGREGATE GROWTHAGGREGATE INCOMEAVERAGE INCOMEAVERAGE INCOME GROWTHAVERAGE INCOMESAVERAGE LEVELCONSUMPTION SMOOTHINGCOUNTRY INDEXCOVARIANCE MATRIXCROSS-COUNTRY DIFFERENCESCROSS-COUNTRY INCOMEDECLINING INEQUALITYDENSITY FUNCTIONDEPENDENT VARIABLEDESCRIPTIVE STATISTICSDEVELOPING COUNTRIESDEVELOPMENT POLICYDISTRIBUTIONAL CHANGEDISTRIBUTIONAL TERMECONOMICSECONOMICS LITERATUREEFFECTIVE GROWTHELASTICITY OF POVERTYEMPIRICAL EVIDENCEEMPIRICAL LITERATUREEMPIRICAL MODELEMPIRICAL RESULTSEMPIRICAL WORKEQUAL COUNTRIESEQUAL WEIGHTERROR TERMFUNCTIONAL FORMGINI COEFFICIENTGROSS INCOMEGROWTHGROWTH COMPONENTGROWTH EFFECTGROWTH ELASTICITYGROWTH RATEGROWTH SPELLSHEADCOUNT POVERTYHEADCOUNT RATIOHETEROSKEDASTICITYHIGH INEQUALITYHIGH INEQUALITY COUNTRIESHOUSEHOLD SURVEYSINCOME DATAINCOME DISTRIBUTIONINCOME GROWTHINCOME INEQUALITYINCOME LEVELSINCOME REDISTRIBUTIONINCOME SHAREINCOME SHARESINCOME SHORTFALLINCREASING INEQUALITYINDIVIDUAL INCOMESINEQUALITY AVERSIONINEQUALITY CHANGESINEQUALITY EFFECTINEQUALITY ELASTICITYINTEREST RATEINTERVENTIONSLINEAR REGRESSIONSLOG INCOMELONG RUNLOW INCOMELOW INEQUALITYLOW INEQUALITY COUNTRIESLOW-INCOME COUNTRIESMEAN INCOMEMEASUREMENT ERRORMIDDLE INCOMEMINIMUM LEVELNATIONAL ACCOUNTSNEGATIVE IMPACTNET INCOMENORMAL DISTRIBUTION0 HYPOTHESISOBSERVED CHANGEPER CAPITA CONSUMPTIONPER CAPITA EXPENDITUREPER CAPITA GROWTHPER CAPITA GROWTH RATEPER CAPITA INCOMEPER CAPITA INCOME LEVELSPERSONAL INCOMEPOINT ESTIMATESPOLICY MAKERSPOLICY OBJECTIVEPOLICY RESEARCHPOORPOOR COUNTRIESPOVERTYPOVERTY CHANGESPOVERTY DECLINESPOVERTY GAPPOVERTY HEADCOUNTPOVERTY LINEPOVERTY LINESPOVERTY MEASUREPOVERTY MEASURESPOVERTY RATEPOVERTY REDUCTIONPROPORTIONATE CHANGESRANDOM EFFECTSRANDOM EFFECTS MODELRELATIVE CONTRIBUTIONRELATIVE CONTRIBUTIONSRELATIVE IMPORTANCERELATIVE INCOMERELATIVE INCOME DISTRIBUTIONRELATIVE INCOMESRELATIVE POVERTYRELATIVE ROLERESIDUAL TERMSIMULATIONSSQUARED POVERTY GAPSTANDARD DEVIATIONUNEQUAL COUNTRIESWEALTHWorld Bank10.1596/1813-9450-3814