Income distribution in models for developing countries

Thesis



At the core of the theoretical part of this thesis is a review of recent attempts at incorporating income distribution in economy-wide models. Most existing models are very detailed and complex but the mechanisms which dominate the results are simple and determined by conveniently extreme assumptions about prices and wages. Typically, prices are either all rigid or all flexible; the treatment of agriculture is unsatisfactory; and dualism in the labour market is ignored. A convincing case for the alleged insensitivity of the distribution of income to policy interventions can not be based on these models.

The major part of the thesis describes two models, for Tanzania and Kenya, and their results. In the first model the emphasis is on the effects of migration and economic growth on the urban income distribution. It describes an economy in which neither prices nor wages respond to changes in market conditions. Distinctive features of the Kenya model include its submodel for smallholder agriculture, educational 'bumping' in the labour market and its emphasis on trade and pricing policies.

The models are used to estimate the effects of policies (wages, trade, pricing, investment allocation, land redistribution) on growth and income distribution. The results contradict some of the conventional wisdom about the two countries. The models explicitly recognise a number of market imperfections, especially in the labour market, which are crucial in determining distributional changes but which are usually ignored in modelling. The results reveal a greater sensitivity of the distribution of income to changes in policies than has been found with some other models.

Authors: Gunning, J; Jan Willem Gunning

• Alternative title: Kenya and Tanzania
• Publication date: 1979
• DOI: 10.5287/ora-xqyzapdwm
• Type of award: DPhil
• Level of award: Doctoral
• Awarding institution: University of Oxford
• Language: English
• Subjects: Tanzania; Kenya; Mathematical models; Income distribution