economic development and income inequality further evidence on the u curve hypothesis abstract internationally comparable data on inequality and income are utilized to reassess the empirical status of kusnets u curve hypothesis the hypothesis seems well supported when both developed countries dcs and less developed countries lcds are included in the sample however the position changes rather dramatically if the sample is restricted to lcds and very small support for the hypothesis is then observed also a simple comparison indicates that some of the support reported in earlier studies may have been due to the use of conventional gross domestic product per capita in general results based on gini coefficient seem less favorable to the hypothesis than those derived from household income shares

changing income inequalities within and between nations new evidence fresh data sources on cross national income are examined to document recent changes in the composition of world income inequality within and between nations new evidence shows that during the 1980s and 1990s the composition of world income inequality experienced a fundamental change characterized by the diminishing significance of between nation income differences and the growing prominence of within nation inequalities two competing trends account for this change 1 steady growth in the average level of income inequality within nations and 2 a decline in income inequality between nations these recent trends signify a reversal in one of the major legacies of the industrial revolution the internationalization of world income inequality across national borders the findings raise important questions for future studies of cross national inequality and development

the nature of economic development abstract economic development has been associated with a sustained increase in real per capita gdp over fairly long periods of time such growth rates have been associated with the phenomenon of structural transformation both among the european leaders and the late comers among the developing countries equally compelling though less pervasive has been an essentially harmonious relationship between the growth of per capita gdp macroeconomic stability and a better distribution of income moreover the incidence of poverty has sharply decreased while the leading indicators of human development have recorded a significant improvement wherever per capita income has increased rapidly this property of economic development christened as orderly transformation in this paper is one of the most outstanding stylized facts of economic development and it has been most evident among countries where growth of per capita income has been in excess of 3 per annum

development and inequality revisited three decades after the seminal article of kuznets 1955 and one decade after the empirical investigation of ahluwalia 1976b the relationship between income inequality and economic developement is still controversial this paper examines the above relationship within a time series cross section framework in a sample of countries which are representative of the non centrally planned economies of the world we use gdp per capita in real un international comparison project dollors as an indicator of a country s level of economic development the results lend support to the kuznets inverse u hypothesis although other factors relfecting the institutional setting of a country are found to affect income inequality significantly during the development process as well similar results are obtained if we exclude developed countries from the sample

growth and its disparity in rich and poor regions abstract we use international comparison data to relate the regional growth and the inequality across countries for four regions of the non communist world the north south east asia south central asia and sub saharan asia the results are compared with findings by kuznets and others

pricing policies and antlerless elk hunting permits one of the effects of increasing emphasis on leisure time in the u s has been a growth in demand for hunting privileges an example of such growth is the rapidly increasing demand for the opportunity to hunt elk in various western states potter 1982 from 1960 1979 the number of licensed elk hunters more than doubled in north america while average elk hunter success steadily declined from 25 to 14 over the same period even though total elk harvests are increasing elk populations are not growing at a rate anywhere near that of current demand growth thus state fish and wildlife departments must utilize methods to allocate elk resources such allocation procedures include split seasons waiting lines drawings and fee increases each with distinct efficiency and equity implications meyer 1979 peek pederson and thomas 1982 the problem of allocating rocky mountain antlerless elk hunting privileges in eastern oregon is instructive in this regard oregon s department of fish and wildlife controls the hunt of antlerless cow and calf elk by controlling the numbers of hunting tags annually issued for each designated geographic area the numbers of tags issued are determined by estimating the quantity of hunters needed to achieve the target harvest level of antlerless elk in each area for a one dollar processing fee prospective hunters may indicate a first and a second choice hunting area from

an exploration of the changes in the international comparison program s global economic landscape abstract the purchasing power parity ppp rates from the 2011 round of the international comparison program icp imply some dramatic revisions to price levels and real incomes across the world as compared to the prior 2005 round this has important implications for many cross country comparisons including measures of poverty and inequality without presuming that either round is better methodologically the paper tries to help the community of icp users better understand the economic factors underlying the estimated changes in price levels across countries differences in domestic inflation rates have played a role as expected two other factors are identified the excess sensitivity to changes in market exchange rates suggests that the ppps may put higher weight on internationally traded goods than do domestic deflators additionally faster growing countries have seen a steeper rise in their ppp relative to market exchange rates this can be explained by a tendency for wage increases in growing economies to lead to a higher price level together these factors account for over 70 of the variance in ppp changes even ignoring methodological changes however an independent downward drift in price levels is also evident concentrated in the icp s asia region a possible explanation lies in the asia region s greater success relative to other regions in removing urban bias in the price surveys

the measurement of inequality and poverty a policy maker s guide to the literature abstract mathematical measures of poverty and inequality embody values that reflect the historical political social intellectual and ethical forces prevalent at the time of their formulation so that policy makers may select measures of poverty and inequality that are consistent with their values it is important to make explicit the value judgements implicit in the measures models designed to measure poverty and inequality fall into four categories absolute poverty measures absolute income measures relative poverty measures and relative inequality measures this article examines the principal models within each category and discusses the assumptions limitations and values implicit in the models

improving environmental valuation estimates through consistent use of revealed and stated preference information abstract environmental valuation data from stated and revealed preference methods are integrated into a unified model of preferences for environmental quality improvement that identifies the use and nonuse components of the total value estimate this articulates clearly what parts of the total value estimate come from each type of data and permits tests of whether estimated preferences satisfy weak complementarity between the environmental good of interest and related private goods the statistical advantages of using more information for the valuation problem are exploited while retaining flexibility to identify value estimates from any individual method of analysis

the structure of income inequality in puerto rico abstract the kuznets hypothesis predicts that the level of income inequality will rise then fall during the course of economic development however empirical studies have found that for many countries inequality levels off after a certain stage of development and remains at this level for a long period of time in this paper one possible reason for the formation of such an inequality plateau is suggested puerto rico is used for our case study employing an augmented input output model we find that the 1963 puerto rican economy had reached such an inequality plateau with a very narrow range of inequality levels permitted by its economic structure we then investigate the relation between the inequality band and the degree of sectoral interdependence we find that under certain assumptions one can show a direct correspondence between the two with the equality range narrowing as the linkages increase once an economic system has reached a certain degree of sophistication in its linkage structure its inequality level may become immobile the implication of this is that after a point the natural course of development will not result in further reduction in inequality at this stage the government might have to intervene directly in income determination to reduce inequality

a note on the functional form of travel cost models with zones of unequal populations as bowes and loomis 1980 noted in their contribution for recreation demand functions of a linear form the existence of unequal zonal populations in travel cost models leads to the problem of nonconstant error variances when observations are expressed on a per capita basis i e when the zone average method is used for a model with nonhomogeneous variances the ordinary least squares ols parameter estimates will be unbiased but inefficient these properties will hold true of the consumer surplus estimates as well a weighting of the observations is the well known solution to the heteroskedasticity problem where in this case the appropriate weighting factor for each observation is the square root of the associated zone of origin s population while preserving unbiasedness the weighted least squares wls approach generates parameter estimates that are equivalent to the generalized least squares gls minimum variance estimators in their application of the travel cost method to recreation trips during 1977 down the westwater canyon in utah bowes and loomis illustrated the efficacy of wls in predicting recreation trips more accurately than ols for a linear first stage demand curve as in previous studies the ols linear regression equation grossly mispredicted the total number of trips taken at the actual price per trip of zero and seemingly overestimated the value of consumer surplus further evidence of this latter finding was obtained in a study of warm water fishing in georgia by ziemer musser and

the necessity for substitute prices recreation demand analyses omitting substitute prices from a travel cost model is shown to cause a significant bias in consumer surplus estimates three sets of travel cost models are developed from a common data base representing 60 000 day users of u s army corps of engineer reservoirs in kansas and missouri the firzt set of models omitted substitute prices the latter two sets included them an analysis of variance test showed that consumer surplus estimates from the first set of models were significantly higher than the other two f 26 2 with 2 20 degrees of freedom the theoretical and practical implications of these findings are discussed economic theory postulates that the demand for a good is a function of its price the price of related goods and services and income still many empirical estimates of demand for recreation sites have ignored the price of substitute recreation sites the most common technique for estimating recreational demand is the travel cost model tcm a comprehensive literature review of the tcm conducted by dwyer kelly and bowes showed that only six of twenty clearly defined tcm demand functions included substitute prices as an argument in the demand function most of the models they reviewed were old but considerable debate remains about incorporating substitutes in the tcm consider the diversity of approaches that have recently been used to incorporate substitute prices into tcm demand functions when modeling recreation demand at corps of engineer reservoirs desvousges smith and mcgivney omitted any

why are services cheaper in the poor countries in their important work on international comparisons of national incomes and of comparative price structure kravis heston and summers i982 p 8 have noted that services are much cheaper in the relative price structure of a typical poor country than in that of a rich country this phenonomen has been documented now fairly systematically by the data gathered under their guiding hand of the united nations international comparison icp which covers 34 countries table i reproduced from their work i982 and fig i based on rows 3 and ii 13 indeed show this tendencyfor the relationship between relative service prices and real per capita gdp in this kravis heston summers 34 country 6 group sample the tendency is strongly evident except for the intermediate groups iii and iv

the developing world is poorer than we thought but no less successful in the fight against poverty a new data set on national poverty lines is combined with new price data and almost 700 household surveys to estimate absolute poverty measures for the developing world we find that 25 of the population lived in poverty in 2005 as judged by what poverty typically means in the world s poorest countries this is higher than past estimates substantial overall progress is still indicated the corresponding poverty rate was 52 in 1981 but progress was very uneven across regions the trends over time and regional profile are robust to various changes in methodology though precise counts are more sensitive

inequality growth and democracy the analysis of the relationship between inequality and economic growth in distinct politi coeconomic environments has been one of the central preoccupations of the extensive theoretical and empirical work on growth in the last decade the authors argue that the empirical evidence available to date strongly indicates the relevance of this work for understanding the elusive causal connection between economic development and democracy the state of the literature suggests considerable sophistication in conceptualizing the direct economic effects of inequality and contains critical insights into politically unconstrained policy making aimed at the alleviation of their negative economic impact however the political feasibility of the recommended policy measures and the politically mediated effects of inequality and redistributive policy on growth and on the strength and stability of democratic regimes are understood less well the authors discuss the critical factors influencing these effects and sketch several approaches to creating a comprehensive politicoeconomic account of the interaction between inequality redistributive policy making and political regimes

behavior of the firm under regulatory constraint a recent article by akira takayama discusses an earlier paper by harvey averch and leland l johnson on fair rate of return regulation of public utilities although takayama p 255 agrees with averch and johnson s general conclusions that a firm will tend to increase its investment with the introduction of an active constraint on its rate of return he criticizes the a j argument as being confusing ambiguous and in error takayama then attempts a clarification and presents a new formulation which leads to the a j result quoted above this comment will discuss several of takayama s criticisms in addition to showing that the so called a j effect cannot be derived from the basic assumptions made by both averch and johnson and takayama 1 we will show that the very assumptions used to prove the a j effect by defining the region of x require an assumption that the a j effect exists in the first place

absolute poverty when necessity displaces desire abstract this paper proposes a new method for defining an international poverty line based on explicit budgeting the novel feature is that linear programming is used to deduce the diet that minimizes cost and guarantees survival nonfood items are also explicitly budgeted and amount to about one quarter of the cost of subsistence a series of least cost diets are calculated with increasingly demanding nutritional requirements for twenty countries using prices from icp 2011 the aim is to see which requirements rationalize the spending pattern of the poor the reduced basic model does the job when the cost of the nonfood items are added to the cost of the reduced basic diet the resulting linear programming poverty line lppl averages 1 88 per day across the poor countries in the sample the same model rationalizes both the spending pattern of the poor and the world bank poverty line the lppl has the advantages that it is 1 clearly related to survival and well being 2 comparable across time and space since the same nutritional requirements are used everywhere 3 adjusts consumption patterns to local prices 4 presents no index number problems since solutions are always in local prices and 5 requires only readily available information namely the prices in icp or equivalent

the effect on income distribution of development the growth rate and economic strategy abstract an analysis of cross section and time series data for 83 countries confirms some and contradicts other work on income distribution new findings include a dualistic socio political system is highly unfavorable for equality neither the extent of government intervention in the economy nor the rate of manufactured exports are systematically related to income distribution the analysis confirms that there is no systematic relationship between equality and the rate of economic growth educational participation and a reduction in the share of primary exports in gdp are both favorable for equality there is some support for the kuznets hypothesis that inequality increases as per capita income rises to about 400 and then declines with further income increase but the empirical support is not strong and may be weakening over time these findings lead to more optimistic conclusions then other work that rapid growth in a mixed economy is quite consistent with unchanged or even improved income distribution even at early stages of development

income inequality development and dependence a reconsideration we reconsider the role of foreign investment in income inequality in light of recent critiques that question the results of quantitative cross national research on foreign capital penetration we analyze an unbalanced cross national data set in which countries contribute different numbers of observations with a maximum of 88 countries and 488 observations dated from 1967 to 1994 random effects regression models that control for unmeasured country heterogeneity are used to investigate effects of foreign capital penetration on inequality measured as the gini coefficient against the background of an internal developmental model of inequality we adapt firebaugh s 1992 1996 critique of the literature on the effect of foreign investment on economic growth to the study of income inequality and find that the stock of foreign direct investment has an effect on inequality that is independent of the mechanisms identified by firebaugh we explore tsai s 1995 claim that the effect of foreign capital penetration is spurious and find that foreign stock has a significant positive effect on inequality net of region specific differences an alternative interpretation of the findings of the foreign investment inequality literature is discussed in light of the discovery of an inverted u shaped relationship between income inequality and foreign investment stock per capita we conclude that thinking on the relationship between income inequality and investment dependence should be revised in light of an investment development path relating the inflow and outflow of foreign capital to economic development

growth and equity with endogenous human capital taiwan s economic miracle revisited this paper presents an endogenous growth model for a small open economy with a significant trade surplus and active government development strategies in order to reexamine the major determinants of economic growth and income distribution this analysis provides a better interpretation for the intertwined relationship between growth and equity an important economic issue that has not been fully addressed by the well known models 5 9 20 in traditional growth studies economists have emphasized the role of two major factor inputs physical capital and labor output growth is considered to depend merely on exogenous shifts in population and technology recently lucas points out that this conventional approach to studying economic growth may leave more than half of output growth unexplained 12 in order to improve the understanding of the underlying endogenous forces promoting economic development new growth theorists have proposed several alternatives to the conventional models such as the endogenous fertility choice 4 the endogenous technological evolution 16 and the endogenous human capital accumulation or learning process 12 13 to name but a few these contributions have generated additional interests in and rich implications for empirical studies of public policy 6 and cross country comparisons 3 15 lucas s endogenous human capital formation model is particularly suitable for studying the

how sensitive is regional poverty measurement in latin america to the value of the poverty line this paper contributes to the methodological literature on the estimation of international poverty lines for latin america based on the official poverty lines chosen by the latin american governments and commonly used in the public debate the paper exploits a comprehensive data set of 86 up to date official extreme and total urban poverty lines across 18 countries in latin america as well as the recently updated values of the national purchasing power parity conversion factors from the 2011 international comparison program and a set of harmonized household surveys by using 3 and 6 us dollars per person a day at 2011 ppp as the extreme and total poverty lines for latin america this paper illustrates the sensitiveness of poverty rates to changes of the values of the poverty lines as a result of the recent update of the ppp values the period of reference and the relative cost of living across the countries in the region the poverty lines with the 2011 ppp values lead to an increase in total poverty rates in latin america when compared to the 2005 ppp values while they leave the extreme poverty rate unaffected in general country specific poverty rankings remain fairly stable to the values of the poverty lines selected

income distribution and development some stylized facts in recent years the relationship between income distribution and the process of development has come under increasing scrutiny 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 with 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

differences in relative prices and international differences in growth rates the new growth literature following paul m romer 1986 and robert e lucas jr 1988 has formulated models in which growth rates can differ systematically across countries a large empirical literature has used cross sectional techniques to examine the cause of international differences in growth rates this paper examines whether this work has used data which have been constructed in such a way as to introduce inadvertently a spurious correlation between growth and income levels this effect occurs because relative prices evolve because of different rates of technological progress in different industries many of the new growth models assume single goods or goods produced by the same technology so this phenomenon has so far escaped analysis if technological progress is more rapid in some sectors than others relative prices will change during the process of development the change of relative prices has two effects on measured growth rates first the choice of base prices affects the growth rate this phenomenon is sometimes called the gerschenkron effect second using any base prices or weights introduces a spurious correlation between income and growth less developed countries would tend to have lower growth rates not because they grew more slowly but because of data construction techniques for the sake of simplicity these phenomena will be called the gerschenkron or the level effect and the spurious correlation effect 3 this paper examines the international comparison program icp and the penn world tables pwt which are based on the icp the penn world tables are the data most widely used in empirical studies of international differences in economic growth both the icp and pwt use international prices to adjust for differences in the purchasing power of currencies these prices most closely resemble hungarian prices using such prices tends to produce time series with lower growth rates than those in the national accounts for countries less developed than hungary conversely the growth rates would be higher for countries more developed than hungary however the growth rates of poorer countries are not systematically lower in the penn world tables the paper examines why the growth rates are not distorted and makes some specific recommendations for data construction and use virginia polytechnic institute and state university blacksburg va 24061 0316 part of this work was supported by a grant from the institute of international studies at brown university and by a summer internship at the division of international finance at the federal reserve board i am grateful to peter garber david weil oded galor and anonymous referees for helpful comments alan heston and robert summers have also helped me understand icp and pwt methodology of course i alone am responsible for any mistakes in this paper iexamples include steve dowrick and duc tho nguyen 1989 robert j barro 1991 j bradford de long and lawrence h summers 1991 and n gregory mankiw et al 1992 2a series of papers by christina d romer 1986a b 1989 has already emphasized the importance of data construction techniques in another context 3there is a third effect a real acceleration effect caused by shifting consumption patterns and the reallocation of resources between sectors growth accountants such as angus maddison 1987 adjust estimates of total factor productivity for this sort of shift william j baumol et al 1989 have also referred to this phenomenon for an analysis in terms of a simple multisector solow model see nuxoll 1992a