Tolerance for Inequality: Hirschman’s Tunnel Effect Revisited

Along the path of economic development, advancement of some groups naturally generates economic disparity in a society. The concurrent presence of winners and losers invariably gives rise to the psychological economic question of how the losers perceive, and respond to, the benefits of development. The ﾑtunnel effectﾒ proposed by Hirschman (1973) provides valuable insights for understanding the changing tolerance for economic inequality among the losers in the process of economic growth. This paper critically discusses this proposition, reviews the related literature, and provides possible extensions.