Productive structure and income distribution

The economic pie is divided among the income classes where high-net-worth individuals buy luxury goods and services while low and middle-income ones buy mass produced goods. Luxury goods are usually imported. If they are produced locally, they will involve a lot of imported content. In addition, they are produced through capital-intensive techniques. Hence, they consume precious foreign exchange in developing countries. The market size of luxury goods remains stable and increase over time as high-income individuals command higher wealth. These individuals intend to change their choices after a short interval. For instance, women opt for latest trends in the fashion industry. Men look out for new models in the automobile industry.