This paper investigates the impact of urbanization on income inequality in developing countries, particularly least developed countries (LDCs). It argues that fiscal measures are insufficient to address income inequality, especially in LDCs. The paper demonstrates that the urban-rural gap is a significant component of national inequality and shows the positive effects of urbanization in narrowing this gap. It challenges the conventional wisdom that urbanization increases inequality and proposes well-managed urbanization as a strategy to reduce income inequality and poverty, advocating for a shift away from anti-urbanization policies.

Guanghua Wan, Xiaoling Zhang, Mengxue Zhao