[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

Fields, Gary S

English

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9-1992 
[Review of the book Income Distribution in Less Developed 
Countries] 
Gary S. Fields 
Cornell University, gsf2@cornell.edu 
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[Review of the book Income Distribution in Less Developed Countries] 
Abstract 
[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. 
Keywords 
development, economic growth, income distribution, poverty, less developed countries, LDCs 
Disciplines 
Economics 
Comments 
Suggested Citation 
Fields, G. S. (1992). [Review of the book Income distribution in less developed countries] [Electronic 
version]. Journal of Economic Literature 30(3), 1542-1543. 
Required Publisher Statement 
© American Economic Association. Reprinted with permission. All rights reserved. 
This article is available at DigitalCommons@ILR: https://digitalcommons.ilr.cornell.edu/articles/491 
1542 Journal of Economic Literature, Vol. XXX (September 1992) 
useful and powerful and, more importantly, 
that there is scope for significant enrichment 
of economic modeling. In Restoring Economic 
Equilibrium Schultz attempts to clarify some 
of the pertinent conceptual ideas to offer sug- 
gestions for a richer role for entrepreneurial 
theory in economics. Evidence from a large 
number of micro studies, most of them under- 
taken by his own colleagues and former stu- 
dents at the University of Chicago, is brought 
to support the general thesis that entrepreneu- 
rial activities restore economic equilibria. (Most 
of these studies addressed specific topics and 
did not seek to develop the broader interpreta- 
tions that Schultz suggests for them here.) 
Schultz recognizes the difficulties inherent 
in entrepreneurial theory. He discusses the 
contribution of Schumpeter, Knight, and 
Hayek and the distinction between risk and un- 
certainty in management. He does not find this 
distinction particularly useful and appeals to the 
human capital concept of allocative ability or 
skill as the more germane dimension of entre- 
preneurship. He notes that producers (includ- 
ing household producers) and consumers will 
come to learn about and develop responses to 
routine and regularly occurring events in a sta- 
tionary economy through repetitive experience. 
Thus allocative skills will have little value in 
such an economy. When new nonroutine 
events and options occur, entrepreneurs must 
assess, experiment, and evaluate, and these ac- 
tivities require allocation skills. Thus in a mod- 
ernizing economy entrepreneurial skills will 
have high value, and more importantly, they 
will be equilibrium restoring. 
The book does offer a chapter on income in- 
creasing events (Ch. 8) but throughout most 
of the book the emphasis is on responses to 
change, not to its generation. The failure to 
deal more explicitly and more fully with dis- 
equilibrium generating activities inherently 
limits the critique of growth modeling because 
the growth or modernization process entails 
both generating and restoring activities. Chap- 
ters 9 and 10 offer suggestions for defining and 
measuring entrepreneurship. The chief sugges- 
tion is that most returns to entrepreneurship 
are reflected in transitory income and associ- 
ated with high levels of nonroutine technologi- 
cal and related events. This interpretation of 
the content of transitory income is not the usual 
one, but is not inconsistent with it. The argu- 
ment that equilibrium restoring earnings are 
transitory rather than permanent requires rela- 
tively irregular flows of disequilibrium generat- 
ing agents. 
Much of the remainder of the book is devoted 
to a review of micro-studies of equilibrium re- 
storing activities. These studies are, in the 
main, studies originating at the University of 
Chicago and many are dissertations by Schultz's 
students. Many deal with the agricultural sec- 
tor. Some readers will find these chapters a 
little too "Chicago-based" for their tastes. Some 
will find these lessons from agricultural studies 
to be of limited relevance for other sectors of 
the economy. Nonetheless the studies are rele- 
vant to the theme of the book and in varying 
degree support the thesis that equilibrium re- 
storing activities deserve more currency in eco- 
nomic modeling. 
In the end the book makes a substantial con- 
tribution to entrepreneurial theory but does not 
rewrite or recast it in a markedly new way. 
Similarly it has many insights to offer to eco- 
nomic growth modelers, but does not, itself, 
develop a new growth theory. General equilib- 
rium modelers will likewise find insights in the 
book. 
The fundamental contribution of the book is 
in calling attention to the evidence that restor- 
ing equilibria is not simply a matter of market 
clearing pressures. It requires work and skills 
and abilities. It also is contingent on economic 
institutions. And these activities, skills, and in- 
stitutions are of great importance in the mod- 
ernizing economy because they are central to 
the process of economic growth. This book 
draws our attention to this in a useful fashion. 
It is a testament to a long and influential career 
by an extraordinary economist. 
ROBERT E. EVENSON 
Yale University 
Income distribution in less developed countries. 
By R. M. SUNDRUM. London and New York: 
Routledge, 1990. Pp. xiv, 327. $69.95. ISBN 
0-415-04805-2. JEL 91-0960 
This book by R. M. Sundrum, a professor 
at the Australian National University and for- 
mer director of the World Bank, is a compila- 
tion of issues, ideas, and data on income distri- 
bution in less developed countries (LDCs). 
Book Reviews 1543 
Each chapter or section has something mean- 
ingful 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. 
Sundrum seeks to give a "comprehensive re- 
view" of the burgeoning recent literature on 
income distribution in developing countries. 
(By "income distribution," he means to take 
account of the entire shape and position of the 
distribution, although at times he slips into 
treating "distribution" as synonymous with "in- 
equality.") Unfortunately, the literature survey 
is neither comprehensive nor particularly re- 
cent. For instance, a review of studies on the 
historical evolution of inequality in the devel- 
oped world should include the books by Wil- 
liamson and Lindert on long-term changes in 
the U.S. and the U.K. However, these do not 
appear in Sundrum's bibliography. As for re- 
cency, most of the data presented and most of 
the studies reviewed by Sundrum come from 
the 1970s. The lessons of the 1980s are all but 
ignored-a problem for a book being marketed 
in the 1990s. 
What, then, has Sundrum covered? Part I 
presents "The Statistical Approach." In it, he 
reviews what is and is not included in data on 
income distribution, how inequality and pov- 
erty indices are constructed, what we have 
learned about cross-sectional patterns and his- 
torical changes in inequality and poverty, and 
what we would need to do to measure the dy- 
namics of income distribution. Many important 
points are touched on here. 
Part II reviews theories of income distribu- 
tion, among them, theories of income distribu- 
tions as random variables, the classical theory 
of functional income distribution, and Lewis' 
dualistic theory. Recognizing that the classical 
theories deal with factor prices and factor shares 
but not with the fraction of people deriving 
incomes from each factor of production, in sub- 
sequent chapters Sundrum delves into incomes 
from land, from labor, and from capital. Unfor- 
tunately, a reader of these chapters comes away 
without knowing an important finding which 
has emerged from numerous decomposition 
studies; this is that most overall income inequal- 
ity is accounted for by inequality in the distribu- 
tion of labor incomes, and it is therefore incum- 
bent upon us to analyze the demand for and 
supply of different types of labor in different 
countries. Instead, Sundrum concludes the ana- 
lytic part by presenting an accounting frame- 
work which relates the structure of production 
to income distribution. 
Part III turns to the policy objectives and 
implications. Chapter 14, which is concerned 
with policy objectives, is best read before read- 
ing the rest of the book. After all, how can 
one evaluate the data without knowing what 
objective one-is interested in attaining? The 
remainder of Part III deals with two kinds of 
policies-regulatory and redistributive. The 
problem is that Sundrum does not cast the pol- 
icy analysis in the context of an overall objec- 
tive. Although he claims (p. 305) that "the most 
serious problem facing LDCs from the distribu- 
tion point of view is the widespread extent of 
absolute poverty" (a view which I share), most 
of his policy attention is devoted to the reduc- 
tion of inequality. 
There are many nuggets of valuable informa- 
tion to be uncovered in this book, both by spe- 
cialists in the income distribution field and by 
novices. And there is another reason for having 
a look at this book: the photograph on the dust 
jacket of a developing country man with devel- 
oped country accoutrements is a marvelous 
piece of work. 
GARY S. FIELDS 
Cornell University 
REFERENCES 
WILLIAMSON, JEFFREY. Did British capitalism breed 
inequality? Boston: Allen & Unwin, 1985. 
WILLIAMSON, JEFFREY AND LINDERT, PETER. Ameri- 
can inequality. NY: Academic Press, 1980. 
P Economic Systems 
After the waste land: A democratic economics 
for the year 2000. By SAMUEL BOWLES, 
DAVID M. GORDON, AND THOMAS E. WEIS- 
SKOPF. Armonk, N.Y. and London: Sharpe, 
1990. Pp. xv, 269. $32.50, cloth; $15.95, pa- 
per. ISBN 0-87332-644-X. JEL 92-0359 
In their 1983 book Beyond the Waste Land, 
Samuel Bowles, David Gordon, and Thomas 
Weisskopf traced the course of the U. S. econ- 


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