INCLUSIVITY OF STRUCTURAL TRANSFORMATION

Abstract The Inclusivity of Structural Transformation and sustainable growth in developing countries may be explained by investigating income inequality in an economy. The previous studies, deeply examine the distributional effects of structural transformation. This study analysis and highlights how economic growth and structural transformation affect the income inequality that has occurred in Pakistan during the previous decades. Pakistan's structural transformation pattern is quite different from other developing countries. Because the labor resource is transferred from agriculture to the service sector. The objective of this study is to analyze the link between the Inclusivity of structural transformation and inequality. Building on a Kuznets framework. According to Kuznets (1955), income inequality would increase with economic growth in a society's early stages of economic development and decrease in the later stages of that growth. This study aims to analyze whether Kuznets's (1955) hypothesis was valid for Pakistan’s structural transformation with the help of the ARDL boundary test approach using data from the 1976-2018 period. As result indicates that Kuznets' Inverted-U hypothesis is valid for the relative employment of the nominal sector. Although the result of the Relative output of the nominal sector is opposite to the relative employment of the service sector. That shows service sector growth is jobless growth and in long run rich get to the richest and the poor become poorer. JEL Code: E2, J21, J24, P16.