In recent years, the relationship between income distribution and the process of development has come under increasing scrutinity. Much of the debate has focused on the hypothesis, originally advanced by Simon Kuznets, that the secular behavior of inequality follows an inverted U shaped pattern which inequality first increasing and then decreasing with development. This hypothesis has become so much a part of the conventional wisdom on this subject that it has generated considerable skepticism about the welfare implications of the development process. Indeed, on some interpretations, developing countries face the grim prospect not just of increasing relative inequality, but also of declining absolute incomes for the lower income groups.
The object of the article is to re-examine the empirical basis for this hypothesis using a recent compilation of cross-country data made at the World Bank. The author uses multiple regression to estimate cross country relationships between inequality, as reflected in the income shares of various percentile groups, and selected explanatory variables reflecting different aspects of the development process. The results suggest that while there may be a secular time path for inequality which developing countries must traverse and which contains a phase of increasing inequality, there is at least no evidence that faster growing countries show higher inequality at the same level of development than slower growing countries.
The analysis of the impact of economic policy and of the process of growth on personal income distribution is getting greater priority in the literature. Such an analysis cannot usefully be pursued in the light of efficiency considerations alone; it must also take equality and equity into account. Equity is defined here as a characterization of a state of affairs in terms of three parameters: (1) the choice of a distributive norm, (2) the specification of what is to be distributed, and (3) a measure of the degree of inequality that exists. A general "equity function" (E) is defined, whose particular form reflects the chosen distributive norm, and whose two arguments are the sum total to be distributed and a measure of the inequality that characterizes the distribution of that sum. Then, a number of critera of distributive justice are compared, and the criteria based on the relative and absolute income gaps are found to be the most useful. This suggests the formulation of an "equity index" (e) which is sensitive to both growth, relative inequality and absolute inequality. Unsurprisingly, empirical estimates show that the "equity index" has risen in socialist countries and fallen in non-socialist countries as a group. The "equity index" is also estimated for a number of individual countries, but the results are difficult to interpret without an in depth analysis of the circumstances of each country.
The first part of the paper presents a new typology of direction of technological progress which is more suited to the problem of employment in developing countries, and factor substitution effects. An alternative to elasticity of substitution is proposed as providing more insights into the employment problems, namely the "range of substitution". The main conclusions here are that labour-saving technological progress as usually defined does not necessarily mean a reduced scope for substitution, contrary to the popular view of the technological determinist, but that nevertheless the most desirable direction of progress is in the neighborhood of the labour-intensive ridge line. The second part of the paper then considers how progress can be so directed. First, technological progress is narrowly defined not as a shift of the isoquant but as a movement of a particular process-point on the isoquant, reflecting the practical nature of R&D.
Concluding that new technology is the result of efforts and resources denoted to a process, the paper infers from that the following policy implication: to improve employment opportunities, R&D resources must be oriented to labour-intensive processes, either by incentives or more explicitly. As a cautionary note, it is suggested factor prices do nevertheless matter, and technical efficiency is still an important criterion.
The article investigates the working of a model of an urban labor market in LDG's which has two sectors—one sector (the U-sector) being characterized by ease of entry, variable hours of work and flexible earnings, the other (the O-sector), by rigid wages maintained at a relatively high level. Migrants from the rural areas respond to the expected earnings in both sectors, and can search for O-sector jobs while participating in the U-sector. Labor supply determined by such a migration function, together with the relative rates of growth of income in the two urban sub-sectors (on plausible assumptions) lead to the possibility that average earnings in the U-sector decline over time relative not only to O-sector wage, but also to the alternative income in the rural sector. In the last section a distinction made between two types of job seekers found in the U-sector—those with and those without an interest in the O-sector—gives the result that average earnings in the U-sector may sometimes be independent of conditions in the O-sector. It is also seen that, under certain conditions, even with ease of entry and variable hours of work, the U-sector may not serve as a channel for migrants seeking to enter the O-sector. The analysis provides a classification of labor market types which may be of help in organizing empirical information from different parts of the world.
This article is an abridged version of a document presented by the author at the World Conference on Employment held in Geneva in 1976. The study deals successively with the role of transnational enterprises in the production (and marketing) of exports to other LDC's and developed countries, the composition of these exports as well as their short and long-term effects on economic development, government revenues, employment and income. Outlining difficulties with which the LDC's will be confronted in their promotion of the export sector, the author puts forward several policy areas where active negotiations between developed countries and LDC's could lead to substantial improvement.
This study addresses several problems of educational policy posed by the replacement of highly skilled expatriates in the Ivory Coast's labor force. Conceptualizing expatriate replacement as an import-substitution activity in which Ivorian labor substitutes for previously imported labor services, the authors apply a modified Domestic Resource Cost (DRC) analysis to evaluate Ivorian secondary and university educational programs necessary to train the local labor.
This methodology, along with more conventional cost-benefit approach, confirms that education is economically desirable in the Ivory Coast and that resource allocation to the upper secondary level is especially warranted. Lower secondary education is useful in so far as it performs a conduit function for higher levels of training. The importance of university education will probably increase as the occupational-educational structure is upgraded through technological development. Finally, consideration should be given to instituting a system of tuition charges in order to equate social and private rates of return in upper secondary and university education.
This study uses a simulation model of the Latin American economy in order to project the relationship between technical progress and income distribution over the 1970-2000 period. In the basic projections—an extrapolation of the present trends—a large number of urban and rural residents tend not to have access to the benefits of development. Alternative projections simulate the effects of policies aiming at i) the acceleration of growth, ii) the modification of the nature of technical progress, iii) the transfer of consumption. The impact of the two first policies is substantial, the main contribution of technological policies being a more equitable distribution of the benefits of growth.