[Review of the book \u3ci\u3eIncome Distribution in Less Developed Countries\u3c/i\u3e]

[Excerpt] This book by R. M. Sundrum, a professor at the Australian National University and former director of the World Bank, is a compilation of issues, ideas, and data on income distribution in less developed countries (LDCs). Each chapter or section has something meaningful to say, and for this reason the book bears careful study. However, no overarching theme or approach is apparent, so the reader is likely to come away with numerous small lessons about distribution and development but few larger conclusions

Labour Market Modelling and the Urban Informal Sector: Theory and Evidence

[Excerpt] The purpose of this paper is to assess the compatibility between theoretical models of the urban informal sector (UIS) and empirical evidence on the workings of that sector in the context of developing countries\u27 labour markets. My major point is that although the UIS is an excellent idea which has served us well in the 1970s and 1980s, we have need in the next round of research to refine our terminology and our models in light of empirical findings which have come to the fore in the interim. I would contend that what empirical researchers label the informal sector is best represented not as one sector nor as a continuum but as two qualitatively distinct sectors. Wage employment or self-employment in small-scale units may be better than or worse than employment in the formal sector. This is not a new point: diversity of earning opportunities and other job characteristics within the informal sector has long been noted — among other places, in the pathbreaking work of Hart (1973) and in the critiques of the informal sector concept by Bienefeld and Godfrey (1975), the ILO Sudan Report (1976), Standing (1977) and Sinclair (1978). But only recently has this view come to the fore: A third point in which agreement has been reached concerns the degree of heterogeneity within the informal sector. Contrary to the prevailing image of a decade and a half ago to the effect that the informal sector was of a homogeneous nature, it is clear today that there are different segments within this sector (Tokman, 1986, p. 13)

A Discussion of Social Protection and Private Insurance

[Excerpt] This is a thoughtful and thought-provoking paper, informative and interesting. I learned a lot from reading this and have already passed it on to others. In my comments, I would like to do four things: highlight the major points and the rationale for them, raise a few quibbles, put forth some additional issues, and propose a possible resolution of a dilemma raised in the paper. But let us first try to be clear about what we are talking about. Professor Pestieau characterizes social insurance as being mandatory, universal, and redistributive. I would define it slightly differently: “Social insurance is a state-run or state-mandated system that is mandatory and universal.” Must it be redistributive? I would say that it may or may not be ex ante in an expected value sense. But of course, social insurance will surely be redistributive ex post once losses are incurred

Poverty and Low Earnings in the Developing World

More than three billion people are poor by international standards, and essentially all are to be found in the low- and middle-income countries of Asia, Africa, and Latin America. The issues for understanding poverty in the developing world - among them, self-employment and household enterprises, agricultural work, casual employment, and informal work – differ from those in the developed world. Different policy issues predominate: stimulating economic growth, harnessing the energies of the private sector, increasing paid employment, and raising the returns to self-employment. This chapter details how the poorer half of the world’s people work and gives an overview of lessons from around the world on what has helped improve their earning opportunities. The chapter concludes with suggestions for future research

[Review of the book \u3ci\u3eStudies of Urban Labour Market Behaviour in Developing Areas\u3c/i\u3e]

[Excerpt] In the 1970s social scientists from all disciplines became aware that an understanding of how labor markets function is central to determining who benefits from economic growth. Only a few researchers concerned with the economic development of Asia, Africa, and Latin America, however, have examined labor markets in any serious way. Hence, a compendium entitled Studies of Urban Labour Market Behavior in Developing Areas is particularly welcome

Trade Strategies and the Poor: Adjusting to New Realities

[Excerpt] The major policy issue examined in this paper is that of a country\u27s choice of a trade strategy in the context of helping the poor. As the end of the 1980s approaches, developing countries face a much more difficult economic situation than that which they confronted at the end of the 1970s. The paper begins by reviewing these new realities and the need for adjusting to them. After mentioning some non-policies, I proceed to consider both successful and unsuccessful country experiences and draw lessons from them. One policy singled out for special attention is wage policy and its interaction with trade strategy. I then analyze the package of policies for outward-oriented, labor-intensive, broad-based growth in one country (Costa Rica) and the possibilities for policy redirection in others. The major findings appear in the conclusion

Changes in Poverty and Inequality in Developing Countries

This paper presents new data on poverty, inequality, and growth in those developing countries of the world for which the requisite statistics are available. Economic growth is found generally but not always to reduce poverty. Growth, however, is found to have very little to do with income inequality. Thus the economic laws linking the rate of growth and the distribution of benefits receive only very tenuous empirical support here

The Unemployment Effects of Minimum Wages

Analyses the effect of a minimum wage on unemployment. Using a model with covered and non‐covered sectors, comparative static analysis is performed with respect to the elasticity of demand for labour in the covered sector, the elasticity of the wage in the non‐covered sector with respect to the size of the non‐covered sector labour force, and the size of the minimum wage. It turns out, contrary to the existing literature, that for none of these parameters is the comparative static effect unidirectional

Rural-Urban Migration, Urban Employment and Underemployment, and Job Search Activity in LDCs

[Excerpt] In this paper, we shall present a formal theoretical mode with which to analyze the equilibrium allocation of the labor force between labor markets. Our basic premise is that the same kinds of forces that explain the choices of workers between the rural and urban sectors can also explain their choices between one labor market and another within an urban area and are probably made simultaneously. The decision-makers -- be they individuals or family units are presumed to consider the various labor market opportunities available to them and to choose the one which maximizes their expected future income

Taiwan’s Changing Employment and Earnings Structure

[Excerpt] In its determined pursuit of economic development throughout the latter part of the twentieth century, Taiwan consistently succeeded in achieving growth rates that were amongst the highest in the world; however, in tandem with such growth, a number of significant changes also took place in the island\u27s labour market. This chapter begins by highlighting some of the most important of these aggregate changes, as follows: (i) the achievement, and subsequent maintenance of, essentially full employment; (ii) improvements in the overall mix of jobs, in particular, a steady reduction in the share of agricultural employment to total employment, a very important shift given that agriculture remains one of the lowest-paying sectors in the Taiwanese economy; (iii) a rise in the share of wage employees, and, in consequence, a fall in the share of own-account work and unpaid family work; this represents another important shift, since wage employees in Taiwan enjoy much higher standards of living than own-account workers and unpaid family workers; (iv) an increase in the share of professional positions and other high-level jobs; a further significant and valuable development, because these are quite clearly the best-paying jobs; (v) real improvements in the educational level of the labour force as a whole; and (vi) a rise in real earnings throughout every sector of the economy, with both male and female earnings having risen at the same pace, in both farm and non-farm households. In addition to all of these changes, real earnings across the entire Taiwanese economy have doubled every ten years, absolute poverty has fallen sharply and the Gini coefficient of individual earnings has remained essentially constant, indicating that income inequality remains strong (further details on all of the above developments are provided in the Appendix, Tables A2.1-A2.7). This chapter sets out to present brief analyses of the changes that have taken place in Taiwan between 1976 and 1993