RESEARCH ON DISTRIBUTION OF GAINS, WEALTH AND INCOME FROM DEVELOPMENT, PHASE II. FINAL REPORT, 5/1/75-12/31/78

This final report was prepared by the contractor, Rice University, and covers the period 5/1/75-12/31/78. Research was conducted on income distribution and on the effect of communalism on income distribution. Income distribution research focussed on the hypothesis that redistribution and economic growth are mutually consistent goals. The hypothesis is based on two assumptions: (1) that redistribution to the poor lowers the capital-output ratio and increases employment (since low-income groups consume more labor-intensive goods than do high-income groups); (2) that any lowering of the aggregate savings rate resulting from redistribution does offset the positive effect of (1). Conflicts in testing this hypothesis reported by previous authors were examined to determine whether these conflicts were caused by conceptual, data, or methodological problems. It was found that past studies used highly aggregated data which did not account for the range of firm sizes within each industry. It was also found that past predictions of conflicts between equity and growth were made on the basis of past pricing policies for production and import substitution and so did not reflect conditions under alternative policies, such as favoring labor-intensive technologies. Research was also undertaken on the savings behavior of low-income households to explain the extent to which differences in savings patterns are caused by fluctuations in the capital markets rather than differing attitudes towards savings. Communalism research centered on the impact of Afro-Asian communal divisions on public policy and on the influence of specific policies and programs on income patterns among religious, ethnic, racial, and linguistic groups. A finding of particular interest was that educational, tax, subsidy, and regional capital investment policies created or reinforced communal income disparities. A 90-item bibliography (1969-78) is included (XD-AAH-293-1), as well as a list of publications disseminating research findings.