The Microeconomics of Income Distribution Dynamics in East Asia and Latin America

The Microeconomics of Income Distribution Dynamics in East Asia and Latin America

The Microeconomics of Income Distribution Dynamics in East Asia and Latin America

The Microeconomics of Income Distribution Dynamics in East Asia and Latin America

Synopsis

"The authors propose a decomposition of differences in entire distributions of household incomes, which sheds new light on the powerful, and often conflicting, forces that underpin the changes in poverty and inequality that accompany the process of economic development. This approach is applied to three East Asian countries - Indonesia, Malaysia, and Taiwan, China - and to four Latin American countries - Argentina, Brazil, Colombia, and Mexico - in recent periods. The book is the outcome of a joint research project of the Inter-American Development Bank and the World Bank." Title Summary field provided by Blackwell North America, Inc. All Rights Reserved

Excerpt

The process of economic development is inherently about change. Change in where people live, in what they produce and in how they produce it, in how much education they get, in how long and in how well they live, in how many children they have, and so on. So much change, and the fact that at times it takes place at such surprising speed, must affect the way incomes and wealth are distributed, as well as the overall size of the pie. While considerable efforts have been devoted to the understanding of economic growth, the economic analysis of the mechanisms through which growth and development affect the distribution of welfare has been rudimentary by comparison. Yet understanding development and the process of poverty reduction requires understanding not only how total income grows within a country but also how its distribution behaves over time.

Our knowledge of the dynamics of income distribution is presently limited, in part because of the informational inefficiency of the scalar inequality measures generally used to summarize distributions. Single numbers can often hide as much as they show. But recent improvements in the availability of household survey data for developing countries, and in the capacity of computers to process them, mean that we should be able to do a better job comprehending the nature of changes in the income distribution that accompany the process of economic development. We hope that this book is a step in that direction.

By looking at the evolution of the entire distribution of income over reasonably long periods—10 to 20 years—and across a diverse set of societies—four in Latin America and three in East Asia—we have learned a great deal about a variety of development experiences, and how similar building blocks can combine in unique ways, to shape each specific historical case. But we have also learned about the similarities in some of those building blocks: the complex effect of educational expansion on income inequality, the remarkable role of increases in women’s participation in the labor force, and the importance of reductions in family size, to name a few.

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