The widening gap
Keywords:Less developed, underdeveloped countries, poverty, widening gap, vicious cycle, foreign aid
In recent years references to a widening gap in incomes and living standards have replaced references to a vicious circle of poverty in discussions of the position and prospects of underdeveloped or developing countries. Like its predecessor was before it, the widening gap theory is linked to important corollaries for policy, notably insistence on the continuation and expansion of large-scale foreign aid. In the present paper it is argued that, although the shortcomings of the notion of the ever-widening gap cannot be so easily and immediately exposed as those of the thesis of the vicious circle of poverty, the idea of the widening gap is no more illuminating and can not serve as bases of sensible discussion, let alone of ration proposals for policy. The author demonstrates some of the major limitations, both conceptual and statistical, of the theory.
JEL: I32, O19, F35