Hierarchical consumption preferences, redistribution, and structural transformation

In low- and middle-income economies, consumption preferences are hierarchical and the production structure is dualistic. Wage demand correspondingly articulates with the domestic industrial sector in a limited fashion. Where capital accumulation is directed at this modern/industrial sector, downward redistributions are less expansionary than commonly outlined, even if capacity utilization is an adjusting variable influencing investment decisions. Insofar as economic development is underpinned by structural transformation, policies aligned with downward redistributions have important sectoral ramifications neglected in one-sector frameworks. This paper explores these and related propositions formally, drawing from the analysis of a two-sector growth and distribution model.