on all fronts (ADB 2012a). Nevertheless, from the viewpoint of policy making, it
is useful to know that shifting population from the rural to urban sectors, holding
all other factors constant, will in the coming years increase national inequality for
India and Indonesia, have limited impact on national inequality for the Philippines,
and help reduce national inequality for the PRC.
In Panels A–D of Figure 13.1, we show graphically how inequality changes
as urbanization proceeds. For this exercise, we use equation (13.2) and set other
variables (k, L1, and L2) in the equation to their end-year values.We show national
inequality as well as its two components: within-group inequality and betweengroup
inequality.