Showing papers in "Review of Income and Wealth in 1992"

Productivity and American Leadership

Abstract: A Review of W. J. Baumol, S. A. B. Blackman and E. N. Wolff, Productivity and American Leadership: The Long View

Relative income determination in the united states: a social accounting perspective

Abstract: The disaggregated nature of a Social Accounting Matrix makes it a suitable tool for studying the income generation process and its distributional effects. Using the linear structure of a SAM, a model for distributional analysis is developed. The proposed approach emphasizes the functional determinants of relative incomes and the underlying structural features of income distribution and redistribution.

Distribution of economic resources: implications of including household production

Abstract: The value of household production is estimated to 40–50 percent of GNP in most western countries, and because the distribution of this income-in-kind is different from ordinary income distribution, the concept of economic well-being may include household production. The monetary value of household production is evaluated by a market alternative principle and an opportunity-cost principle. In the last case a reservation wage is estimated, and integrated in a modified opportunity principle, which means that household work of non-working women is evaluated by the reservation wage, and household work of working women and men by their wage-rate. The conclusions are among others, that the inclusion of household production reduces the inequality, and that the women's contributions—money income and household production—functions as income equalizers.

Capital accumulation in latin america: a six country comparison for 1950–89

Abstract: This article provides estimates of gross and net fixed capital stock for six Latin American countries: Argentina, Brazil, Chile, Colombia, Mexico, and Venezuela for 1950–89. The capital stocks have been generated using the perpetual inventory method. To use the perpetual inventory method, historical time series of gross fixed investment, broken down into machinery and equipment, residential and non-residential structures were estimated. The diskette accompanying the article contains a detailed description of the sources and series used and for each country, long-term series (1900–89) of GDP at constant 1980 national prices, GDP at constant 1980 international dollars, population, GDP per capita and gross total and disaggregated investment in national currencies and as a percentage of GDP. The diskette also contains a complete set of net and gross capital stock estimates, average ages, average service life and capital-output ratios for 1950–89 each in national currencies and international dollars. The findings show rising capital-output ratios in most countries, except for Chile, where it remains more or less constant, and Colombia, where the ratio falls.

Methods of estimating household equivalence scales: an empirical investigation

Abstract: This paper presents empirical evidence regarding key assumptions of the Rothbarth and Barten methods of constructing household equivalence scales. The assumption of separability in the Rothbarth model is investigated by examining the implied intra-household allocation of specific goods and by examining studies of economies of scale in household consumption. The assumption of the exogeneity of the distribution parameters in the Barten model is related to the results of empirical studies of clothing expenditures. This paper suggests that empirical evidence fails to support the assumptions maintained in these theoretically sophisticated models of household income equivalence.

The distribution of income and wealth in japan

Abstract: This paper reviews research on the distribution of income and wealth in Japan, identifies sources of data on income and wealth, and describes limitations of these data. Evidence that Japan's poorest income groups are relatively well-off is convincing, but there is less evidence that the overall distribution of income in Japan is more equal than in other OECD countries. Agricultural policy, social welfare policy, the tax system, trends in earnings differentials, and the role of the Japanese family are among the many factors that have shaped Japan's income distribution. The rapid appreciation of the stock market and land prices during the late 1980s led to greater inequality in the distribution of wealth. Rapid population aging is expected to lead to an increase in total national wealth relative to national income which may have an adverse impact on the distribution of income.

New zealand's gross national product: 1859–1939

Abstract: In this paper the author continues the work of Hawke, who used Australian velocity of money data to estimate New Zealand's GDP for 1870–1918, and whose results have been incorporated into international studies through the work of Bairoch. He also provides an alternative set of estimates for the inter-war years to those published by Lineham. The important findings of the paper are: (i) that Australian data show a significant relationship between the velocity of money and the price level; (ii) that New Zealand's income was significantly higher in 1870 than Hawke's estimates suggest; (iii) that sustained per capita growth has not been New Zealand's normal experience; (iv) that previous GDP estimates for the inter-war period have failed to reflect the fluctuations of the New Zealand economy and the extent to which it was operating below its production possibilities frontier during the Great Depression of the 1930s.

Interstate income inequality in the united states: measurement, modelling and some characteristics

Abstract: Five points are made in this study. First, using a well-recommended measure, interstate income inequality is reported for each year from 1950 through 1989, and its very small magnitude is pointed out along with the U-shaped profile. Second, it is shown that a simple quadratic-form model fits the data extremely well. Third, inequality indices for 1977 and 1988 are recomputed after adjusting for interstate price-level variations, and large reductions in the indices, and a virtual disappearance of the increase in inequality after 1978, are noted. Fourth, a simple decomposition shows that income changes account for most of the inequality change in each decade. Last, states that have contributed most to inequality are identified.

INTERNATIONAL COMPARISONS OF EARNINGS INEQUALITY FOR MEN IN THE 1980s

Abstract: Growing inequality in the distribution of labor market earnings in the United States has become one of the more popular research topics in labor economics in recent years. Researchers in the early 1980s first observed rising earnings inequality among men (e.g., Henle and Ryscavage, 1980; Plotnick, 1982). Since that time many papers, articles, and books have been written about the increase in earnings inequality during the 1980s and the possible explanations for the development (Levy and Murnane, 1992).

Household consumer expenditure inequalities in india: a decomposition analysis

Abstract: The objectives of this study are to decompose household consumer expenditure inequalities in India by regions (states) and sectors (urban-rural) for the years 1977–78 and 1983 based on the National Sample Survey data. A class of Generalised Entropy measures is used. Our results consistently indicate that the inequality within states contributes much more towards national inequality and within-sector inequality explains a large part of state level inequality. The inequality at state levels has shown a decline from 1977–78 to 1983 due to a better monsoon season in 1983, and anti-poverty programmes.

A feminisation of poverty in great britain

Abstract: In most industrialised nations, women are over-represented in the ranks of the poor. Furthermore, it is often argued that this gender-based disadyantage has increased over time. In this paper the author tests this so-called “feminisation of poverty” hypothesis in Great Britain. Cross-sectional data from three years of the Family Expenditure Survey (1968, 1977 and 1986) are used. A poverty measure that is additively decomposable with population share weights, and is consistent with Sen's axiomatic approach to poverty measurement, is used to decompose the “total” amount of poverty into male and female “shares.” Somewhat surprisingly, this decomposition lends no support to the feminisation of poverty hypothesis.

Revised real canadian gnp estimates and canadian economic growth, 1870–1926

Abstract: Revised Canadian real GNP estimates for the 1870–1926 period, based on the nominal GNP estimates constructed by M. C. Urquhart and on a variety of sector-specific price indexes, are presented below. The construction of this revised real GNP series allows for the creation of real output estimates for the major sectors of the Canadian economy as well as for a new implicit price index series. These revised estimates cast new light on our present understanding of Canadian economic growth and reinforce the view that the Canadian wheat boom probably played an important and positive role in the process of Canadian economic development.

Post-reform productivity performance and sources of growth in chinese industry: 1980–85

Abstract: This paper examines the productivity growth and its sources in 39 Chinese industries in the post-reform period 1980–85. We use both the gross-output and value-added models to isolate the contributions of labor, capital, materials and technical efficiency to growth in industrial output. Using new data from the National Industrial Census of China (1988) for large and medium-size enterprises, we find that Chinese industries, in particular, those in the manufacturing experienced sharp increases in total factor productivity growth in the 1984–85 period as compared to the 1980–84 period. Moreover, collective and private enterprises show higher output and total factor productivity gains than do state enterprises. Our regression results show that total factor productivity gains are closely tied to increases in retained profits and the proportion of total employees that are technical workers. However, labor bonuses have a negative effect on total factor productivity growth.

The Non-Constancy of Equivalence Scales

Abstract: Comparisons of households of differing composition are usually achieved through the use of equivalence scales. It is well known that the choice of scales can have considerable impact on the conclusions drawn from studies of welfare and poverty. There is a considerable literature on the theoretical issues relating to equivalence scales, but applied work on income distribution and related areas almost invariably takes scales to be constant irrespective of income. This paper focuses on the relation of scale to income, by applying theoretical analysis to some simple household types. The conclusion is that scales are not constant and that current practice should be changed.

Household and enterprise saving and capital formation in the united states: a market transactions view

Abstract: Contrary to conventional macro theory, it is not the consumption function in terms of either the permanent income or the life-cycle theory of saving that has furnished the saving for enterprise capital formation in the United States. Household sector accounts indicate that household gross saving, correctly measured, did not exceed household gross capital formation in the United States over the period since 1947. Furthermore, historical data on enterprise saving and capital formation in the United States, and cross-section tax return data of U.S. corporations indicate that the gross saving for many enterprise sectors has been equal to or greater than their gross capital formation. There are exceptions, however: these same sources indicate that public utilities have borrowed substantially to finance their capital formation. Finally, it is argued that employer pension and insurance reserves held by financial institutions for future benefit payments represent retained income of a nature similar to undistributed profits, and that these constitute a source of saving in the economy.

An economic core system and the socio‐economic accounts module for the netherlands

Abstract: In this article the authors discuss some elements of the structure of an overall integrating system of economy-related statistics. First of all attention is paid to the core of such a system. Next, the various types of modules which could supplement this core are described. Modules with a social connotation are discussed with the help of the Socio-economic Accounts which have been developed recently in the Netherlands. Finally, the link between the Socio-economic Accounts and the National Accounts Core System is addressed and numerically illustrated.

Labour force participation, race and human capital: influence on earnings distributions across states

Abstract: In this paper we analyze the level of income inequality across states in 1970 and 1980 for several demographic groups. Furthermore, we examine the impact of labor force participation (LFP), education and other variables on inequality. We find that for tshe whole population, states with high LFP by females are states with low income inequality. The same holds true for states with high LFP for men. When we disaggregate by race, the results are quite consistent for whites, but not for blacks. States with relatively high education levels are associated with high inequality levels for the white cohort and the whole population, but there appears to be no similar association between education and inequality across states for blacks.

Reasons for preferring net to gross figures of income and product (and vice versa)

Abstract: For the first time, a systematic discussion is presented of the choice between gross and net national accounting figures of value added, product and income for alternative purposes. Some traditional arguments for preferring gross to net figures are challenged and several historical reasons are given for the present popularity of gross figures. The quantitative importance of the issue (“what does it matter in practice?”) is also assessed.

New budget standard poverty lines for malaysia

Abstract: In this paper, shortcomings of the official poverty line are examined. A new set of budget standard poverty lines were derived for various years between 1959 and 1981, by first estimating the food budget for Malaysian households. Then, an allowance for non-food items was obtained on the basis of the estimated food budget, and the relationship between the proportion of income allocated on food and non-food items, together yielding the poverty line. The results suggest that the official and other estimates of the poverty line income were generally higher, and thus have overestimated the extent of poverty in Malaysia. Poverty can be defined either in absolute or in relative terms. In the absolute sense, it is defined as an income level that is inadequate for purchasing the minimum necessities of life. Relative poverty is concerned with the relative position of income groups along the national income scale. There is much disagreement on the most appropriate concept of poverty in relation to a given society. However, there seems to be some consensus that in the context of Third World Countries the absolute poverty concept is more appropriate, while in high income countries, relative poverty may be more important (Sen, 1983, p. 153). The Malaysian government adopts a budget standard poverty line to measure, plan and design policies to ameliorate poverty (Malaysia, 1976) which is described in the following section. In section 3 a new budget standard poverty line is defined for the country. In the final section a discussion of the results and implications of this study is undertaken.

Income distribution and economic change in paraguay, 1972–88

Abstract: The author reconstructs the income distribution of families in Paraguay for 1972, 1982, and 1988 by aligning three different urban household surveys with two farm income and two land tenure studies within a national accounts framework. He finds, first, a narrowing disparity between average family incomes in agriculture and non-agriculture in the recent decade, and, second, a steady widening in the agrarian distribution in contrast to a more stable non-agricultural distribution. The “cross-over” of the Paraguayan agricultural distribution from one of greater to lesser equality than the non-agricultural distribution is also found for a number of other recent cases and confirms Kuznets' speculation about the North American data. In the Paraguay experience, the “cross-over” may be due to the deepening cleavage between the commercial minifundia and the modernizing latifundia in the areas of new settlement. Paraguay's countrywide distributions are also compared to other Latin American economies of similar income level and agricultural shares.

Vertically integrated productivity measures: tests of standard assumptions

Abstract: In this paper we use an input-output framework to examine two criticisms of standard measures of total factor productivity. These criticisms are (1) that the contribution of capital to productivity growth is underestimated, and (2) that the use of cost shares to weigh factor input contribution is questionable. Using various vertically integrated productivity measures we find that capital's productivity contribution is underestimated in the neoclassical formulation. We also find that in a Pasinetti-Rymes growth model, factor shares do not approximate output elasticities. We conclude that the argument made by Pasinetti, Rymes, and others is supported, that in long-run productivity analysis capital should not be treated as a primary input, but should be measured as an intermediate, produced input.

Accounting for gold: the south african case

Abstract: Real output measures in the UN System of National Accounts should be continually re-evaluated, to ensure they are providing indicators appropriate for user needs. The South African gold mining industry is an intriguing case in which the conventional output indicators are highly misleading for various analytical purposes, largely because the usual background assumptions are particularly invalid. Due to the size of the industry, its precise treatment can have sizeable effects on estimates of the growth of GDP, particularly over periods when the price of gold changes. A number of easily produced additional output measures are suggested to help analyse productivity growth and differences between the growth of real output and real incomes.

Regional accounts in action: concerning methodological problems from a belgian perspective

Abstract: In this paper we address the methodological problems encountered in the building of regional accounts. These problems are discussed by describing the methodological and conceptual options applied in an original and recent experience with regional accounts in Belgium. A comparison is offered with alternative choices concerning the regionalisation of main aggregates made in some other countries. The reasons for the urgency of an appropriate regional accounting framework (a regional equivalent of the universal SNA) are outlined in the conclusion.

Wealth and consumer horizon: evidence from a developing economy

Abstract: This paper presents new evidence on the length of consumer horizon, which represents an important aspect of the Permanent Income Hypothesis. It uses data on private wealth of India for 1949-50 to 1974-75. Time varying parameter estimation is used to derive annual values of consumer discount rate and horizon. The findings support Friedman's view that horizon is approximately three years long. The author discusses the plausibility of his findings. Two types of tests have appeared in the literature to examine the validity of the Permanent Income Hypothesis (PIH). The first type of tests has addressed the relevance of the strict version of the PIH, viz., that the permanent consumption is proportional to permanent income and that the marginal propensity to consume out of transitory income is close to zero. The second type of tests has examined the length of the consumer horizon to see if it was longer than one year and thus the policy implications of the PIH were indeed different from the ones derived from the Keynesion type Absolute Income Hypothesis. Since the PIH has exciting policy implications for the savings efforts in underdeveloped countries several attempts have been made to understand the relevance of this theory in the context of underdeveloped countries. However, most of the studies thus far have been confined to the first type of tests. As yet no suitable attempt appears to have been made to calculate the length of the consumer horizon to see if it is equal to or longer than one year. At the very outset it may be noted that the term "horizon" in the PIH has a quite different meaning from what it usually does. As it has generally been used "horizon" implies a cutting off point-that a consumer does not look beyond, say, three years if that is the length of his horizon. In other words, in the usual parlance horizon implies a planning period. However, in relation to the PIH (Friedman, 1958, 1963) it means that it is the dividing line between effects he (consumer) considers transitory and those he considers permanent; that he will not adjust his consumption pattern to actual or possible changes in circumstances except as these can be expected to affect his consumption possibilities for a period longer than three years; and hence he definitely does look beyond three Note: I am grateful to Moses Abramovitz for several helpful comments on an earlier version of this paper. I am also thankful to a referee of this journal and the Managing Editor for many useful comments. To Mr. Jagdish Kumar, former Director of National Income Accounts at the Central Statistical Organization in New Delhi, I owe a special debt for his help in collecting data for reproducible tangible wealth of India. I am also thankful to Ela Trivedi for computations reported here.