Proposal preview

Inequality in the Global South: trends, drivers and mechanisms

In recent years the study of inequality has received a revival of interest, of which Thomas Piketty’s Capital in the Twentieth Century is a striking and influential example. The major theme that emerges from the growing body of literature on inequality, is the calling into question of the once dominant stylized facts first formulated by Simon Kuznets around the middle of the twentieth century. Kuznets postulated an inverted U shape relationship between income inequality and economic growth, with inequality being affected by the reallocation of workers from the traditional agricultural sector to the more advanced, non-agricultural/urban sector. When labour starts to move out of agriculture, inequality is expected to first increase. As development continues, inequality is expected to decline again as more and more people are incorporated into the modern sectors.

The past decade has seen a substantial increase in the number of estimates for inequality for pre-industrial societies, mostly for the West (Alvarez-Nogal and Prados de la Escosura, 2004; 2007; 2013; Alfani, 2010; 2014; Alfani and Ryckbosch, 2016; Reis, 2016; Lindert and Williamson, 2016). This research has amongst other things called into question the timing of increasing inequality, which could be traced to the pre-industrial economy; and it has shown that this Kuznets curve is not necessarily a one-time event but could also consist of recurrent Kuznets waves (van Zanden, 1995; Milanovic, 2016). While all this new evidence is increasing our understanding of pre-industrial inequality trends in the developed world, much remains to be done for other world regions.

Recent work has begun to explore long term inequality trends in the Global South (Bertola et al. 2008; Milanovic, Lindert and Williamson 2011; Marette, 2013; Lopez Jerez, 2014; Rodriguez Weber, 2015; Arroyo Abad and Astorga Junquera (2016), Bolt and Hillbom, 2016; Alfani and Tadei, 2017). But much remains to be done before we understand the trends, drivers and mechanisms of long term inequality in today’s developing world. This session aims to act as a stimulus for people to engage in the study of long term inequality in today’s developing countries by inviting papers presenting both long term inequality estimates for pre-industrial societies in the Global South and work that explicitly furthers our knowledge on the drivers and mechanisms of early inequality in developing regions.

Organizer(s)

  • Jutta Bolt University of Groningen j.bolt@rug.nl Netherlands
  • Ellen Hillbom Lund University ellen.hillbom@ekh.lu.se Sweden
  • Federico Tadei University of Barcelona federico.tadei@ub.edu Spain

Session members

  • Denis Cogneau, Paris School of Economics
  • Prince Young Abouagye , Lund University
  • Sascha Klocke , und University
  • Calumet Links, Stellenbosch University
  • Erik Green, Lund University
  • Federico Tadei, University of Barcelona
  • Michiel de Haas, Wageningen University
  • Facundo Alvaredo, Paris School of Economics
  • Jutta Bolt, University of Groningen
  • Ellen Hillbom, Lund University
  • Sabrina Siniscalchi, Universidad de la República (Uruguay)

Discussant(s)

Papers

Panel abstract

1st half

Dividing the spoils of a colonial ‘cash crop revolution’: income inequality in Uganda, 1900-1970

Michiel de Haas

The drivers, nature and extent of inequality in sub-Saharan Africa have long been contested and recently re-emerged at the forefront of scholarly debate. This study investigates income inequality in colonial and early post-colonial Uganda. An export-oriented smallholder economy with favourable resource endowments and high social mobility, some have portrayed colonial Uganda as relatively equal. Others, however, have stressed regional and ethnic inequities, and the concentration of income in the hands of small but economically important South Asian and European minorities. This paper aims to provide a firmer empirical foundation for these debates, by estimating incomes for 10 social classes for nine years between 1919 and 1965. The results suggest that both seeming incompatible historiographical perspectives are valid. GINI coefficients of total income, including subsistence, were comparatively low throughout (~0.34). However, the distribution of monetary income was much more skewed (~0.52) and largely defined by race, ethnicity and location.

The drivers, nature and extent of inequality in sub-Saharan Africa have long been contested and recently re-emerged at the forefront of scholarly debate. This study investigates income inequality in colonial and early post-colonial Uganda. An export-oriented smallholder economy with favourable resource endowments and high social mobility, some have portrayed colonial Uganda as relatively equal. Others, however, have stressed regional and ethnic inequities, and the concentration of income in the hands of small but economically important South Asian and European minorities. This paper aims to provide a firmer empirical foundation for these debates, by estimating incomes for 10 social classes for nine years between 1919 and 1965. The results suggest that both seeming incompatible historiographical perspectives are valid. GINI coefficients of total income, including subsistence, were comparatively low throughout (~0.34). However, the distribution of monetary income was much more skewed (~0.52) and largely defined by race, ethnicity and location.

Income Inequality under Colonial Rule; Evidence from the French Empire in comparison with the British Empire, French Algeria, Cameroon, Indochina and Tunisia, 1920-1960

Denis Cogneau, Facundo Alvaredo

We exploit for the first time income tax tabulations for colonial Algeria, Cameroon, Indochina and Tunisia 1920-1960. As measured by top incomes shares, inequality was extremely high in French colonies. It was pulled downward by the crisis of the 1930s and WW2 combined, yet in the 1950s income inequality stabilized at much higher levels than metropolitan France. European settlers made the bulk of top income earners everywhere, yet in the 1950s rich Tunisians counted for one fifth, with possibly a majority of Jews among them. Inequality among settlers was limited, both within and across colonies, and very few of them were extremely rich by metropolitan standards, in contrast with settlers in South Africa or Zimbabwe at the same time.

We exploit for the first time income tax tabulations for colonial Algeria, Cameroon, Indochina and Tunisia 1920-1960. As measured by top incomes shares, inequality was extremely high in French colonies. It was pulled downward by the crisis of the 1930s and WW2 combined, yet in the 1950s income inequality stabilized at much higher levels than metropolitan France. European settlers made the bulk of top income earners everywhere, yet in the 1950s rich Tunisians counted for one fifth, with possibly a majority of Jews among them. Inequality among settlers was limited, both within and across colonies, and very few of them were extremely rich by metropolitan standards, in contrast with settlers in South Africa or Zimbabwe at the same time.

Inequality and extraction ratios in a slave economy: The case of Cape colony

Calumet Links, Erik Green

Over the last decade or so studies on long-term inequality and the effects thereof have received a great deal of attention among economic historians. Yet many of these studies have suffered from a shortage of data to various degrees. In an effort to bridge this gap we add to the debate on pre-industrial inequality by measuring inequality and extraction on a sectoral basis (wheat, wine and livestock) rather than for the economy as a whole. This paper will attempt to do three things. Firstly, we provide district level gini coefficients for each year over the 1805 to 1828 period for the settler farming population in three districts of the Cape Colony, i.e. Graaf-Reinet, Tulbagh and Stellenbosch. Second, we estimate the incomes of the indigenous farm labourers and slaves for the first two decades of the 19th century. Third, we calculate the total output for the settler farming sector in each...

Over the last decade or so studies on long-term inequality and the effects thereof have received a great deal of attention among economic historians. Yet many of these studies have suffered from a shortage of data to various degrees. In an effort to bridge this gap we add to the debate on pre-industrial inequality by measuring inequality and extraction on a sectoral basis (wheat, wine and livestock) rather than for the economy as a whole. This paper will attempt to do three things. Firstly, we provide district level gini coefficients for each year over the 1805 to 1828 period for the settler farming population in three districts of the Cape Colony, i.e. Graaf-Reinet, Tulbagh and Stellenbosch. Second, we estimate the incomes of the indigenous farm labourers and slaves for the first two decades of the 19th century. Third, we calculate the total output for the settler farming sector in each district. This information will then provide one of the most robust calculations of extraction ratios for a pre-industrial society in existence.

Inequality in Federation. Long term inequality trends for colonial Malawi, Zambia and Zimbabwe 1910-1965

Jutta Bolt, Erik Green, Ellen Hillbom

During the colonial era the economies of Malawi, Zambia and Zimbabwe were closely connected, not only geographically but also through regional markets and labour migration patterns. At the same time, the three territories differed markedly - Malawi being a peasant economy, Zambia primarily relying on its mineral wealth and Zimbabwe with its influential settler population. In this paper we present long term income inequality trends for the three territories based on social tables, and explore what factors drove inequality trends in the region. Did the interconnectedness lead to similar patterns, or did the distinguishing characteristics imply diverging trends in inequality?

During the colonial era the economies of Malawi, Zambia and Zimbabwe were closely connected, not only geographically but also through regional markets and labour migration patterns. At the same time, the three territories differed markedly - Malawi being a peasant economy, Zambia primarily relying on its mineral wealth and Zimbabwe with its influential settler population. In this paper we present long term income inequality trends for the three territories based on social tables, and explore what factors drove inequality trends in the region. Did the interconnectedness lead to similar patterns, or did the distinguishing characteristics imply diverging trends in inequality?

2nd half

Economic Inequality in Ghana, 1891-1960

Prince Young Abouagye

This paper contributes to a growing literature on understanding drivers of pre-industrial inequality by constructing social tables for colonial Ghana. Ghana is generally perceived as fairly equal in terms of income distribution, both historically and today. We show, however, that income inequality rose rapidly during the colonial period, to inequality levels comparable to many contemporary African countries. We argue that the introduction and expansion of cocoa cultivation at the end of the 19th century in the forest belt of the country marked the most important development that shaped both national and regional inequality trends. Initial land abundance in the forest area provided opportunities for its population to engage in cocoa growing which increased the overall standards of living in the forest area. Areas where soil quality did not favour cocoa growing fell behind in terms of living standards, resulting in increasing national income inequalities from the 1930s onwards. Due to...

This paper contributes to a growing literature on understanding drivers of pre-industrial inequality by constructing social tables for colonial Ghana. Ghana is generally perceived as fairly equal in terms of income distribution, both historically and today. We show, however, that income inequality rose rapidly during the colonial period, to inequality levels comparable to many contemporary African countries. We argue that the introduction and expansion of cocoa cultivation at the end of the 19th century in the forest belt of the country marked the most important development that shaped both national and regional inequality trends. Initial land abundance in the forest area provided opportunities for its population to engage in cocoa growing which increased the overall standards of living in the forest area. Areas where soil quality did not favour cocoa growing fell behind in terms of living standards, resulting in increasing national income inequalities from the 1930s onwards. Due to high set up costs of cocoa farms and increasingly polarized access to economic resources, only a wealthy minority was able to establish substantial cocoa farms, gaining much more than other social classes. The capital intensity of the export crop along with access to economic resources such as land seems an important factor driving inequality trends in Africa.

Functional income distribution in Uruguay by GDP sectors 1908-1963: Winners and losers of the distributional struggle

Sabrina Siniscalchi, Henry Willebald

The purpose of this empirical study is to analyze the evolution of the labor share and the capital share –with a particular emphasis on the land rent–, on the Uruguayan economy during 1908-1963, covering the period between the only two national censuses developed in the country in the first half of the 20th Century. We estimate four benchmarks (1908, 1919, 1936 and 1945) which are in agreement with the available official information for 1955-1963 (BROU, 1965). The methodology employed was the construction of social tables, and the paper provides a quantitative description and a shift-share analysis. We find an increasing presence of salary remuneration during the period while the land rent diminishes, in a historical context where improving redistribution was a specific objective of the state policy. We observed that the import substitution period has outstanding gains regarding labor-shares due to increments on the real wage of the industrial sector,...

The purpose of this empirical study is to analyze the evolution of the labor share and the capital share –with a particular emphasis on the land rent–, on the Uruguayan economy during 1908-1963, covering the period between the only two national censuses developed in the country in the first half of the 20th Century. We estimate four benchmarks (1908, 1919, 1936 and 1945) which are in agreement with the available official information for 1955-1963 (BROU, 1965). The methodology employed was the construction of social tables, and the paper provides a quantitative description and a shift-share analysis. We find an increasing presence of salary remuneration during the period while the land rent diminishes, in a historical context where improving redistribution was a specific objective of the state policy. We observed that the import substitution period has outstanding gains regarding labor-shares due to increments on the real wage of the industrial sector, but also on the public sector –as a consequence of the political patronage practices– and other services.

Race, Skill, and Income Inequality in the Colonial Public Sector: British Tanganyika, c. 1920-1960

Sascha Klocke

This paper investigates the hypothesis that both the level and trend of income inequality in the formal sector in colonial Tanganyika was primarily driven by race and skill premiums, with skill premiums being the more important factor of the two. The establishment of the colonial economy can be seen as an external shock leading to rapid skill-biased technological change which led to relatively high levels of inequality. Preliminary analysis suggests that formal sector inequality experienced a downward trend in the later colonial period due to the “Africanisation” of the colonial economy and the public sector as the native population acquired the necessary skills to engage in the colonial economy beyond unskilled labour. While race premiums did play an important role, that role was smaller than in other cases, such as South Africa, where explicit “colour bars”, which banned the native population from most higher-skilled jobs (or income-generating activities), were enacted.

This paper investigates the hypothesis that both the level and trend of income inequality in the formal sector in colonial Tanganyika was primarily driven by race and skill premiums, with skill premiums being the more important factor of the two. The establishment of the colonial economy can be seen as an external shock leading to rapid skill-biased technological change which led to relatively high levels of inequality. Preliminary analysis suggests that formal sector inequality experienced a downward trend in the later colonial period due to the “Africanisation” of the colonial economy and the public sector as the native population acquired the necessary skills to engage in the colonial economy beyond unskilled labour. While race premiums did play an important role, that role was smaller than in other cases, such as South Africa, where explicit “colour bars”, which banned the native population from most higher-skilled jobs (or income-generating activities), were enacted.

Income Inequality in Colonial Africa: Building Social Tables for Pre-Independence Senegal, Ivory Coast, and Central African Republic

Guido Alfani, Federico Tadei

Today, income inequality in Sub-Saharan Africa is exceptionally high. In this paper, we study whether present-day inequality can be traced back to the colonial period by reconstructing income distributions in a sample of representative colonies. To do so, we use data from colonial records to build new social tables for French colonies in West and Central Africa and we combine them with available information on British colonies in East and Southern Africa. We find that inequality in Africa is not a recent phenomenon. Income inequality was extremely high during the colonial period, in particular because of the huge income differential between Africans and European settlers. Nevertheless, it tended to reduce over time and the post-colonial period is characterized by much lower inequality. Interestingly, the decline of inequality is not necessarily a consequence of independence: the trends toward reduction started under colonial rule.

Today, income inequality in Sub-Saharan Africa is exceptionally high. In this paper, we study whether present-day inequality can be traced back to the colonial period by reconstructing income distributions in a sample of representative colonies. To do so, we use data from colonial records to build new social tables for French colonies in West and Central Africa and we combine them with available information on British colonies in East and Southern Africa. We find that inequality in Africa is not a recent phenomenon. Income inequality was extremely high during the colonial period, in particular because of the huge income differential between Africans and European settlers. Nevertheless, it tended to reduce over time and the post-colonial period is characterized by much lower inequality. Interestingly, the decline of inequality is not necessarily a consequence of independence: the trends toward reduction started under colonial rule.