Proposal preview

Presidential session: Industrialization and Income Distribution around the World: A Historical and Comparative Perspective

In the introduction of Handbook of Income Distribution, Anthony Atkinson and Francois Bourguignon (2015) impressively write:

“When the first volume of the Handbook of Income Distribution was published in 2000, the subject of income inequality was not in the mainstream of economic debate—despite the long history of engagement with this issue by earlier leading economists—(omission). Fifteen years later, inequality has become very much centre stage.”

There is a good reason for that. In the period after the World War II, income distribution was primarily supposed to be an issue for developing countries and to be resolved through economic development, because in most advanced countries income inequality was in declining trends until the 1970s, i.e. in the downswing of the Kuznets Curve. Since the 1980s, the scene has been changing dramatically. In many advanced countries, especially in U.S. and U.K., income inequality has been rising sharply these decades. Furthermore, in developing and emerging countries, including two new industrial giants, China and India, which account for around 35% of the world population, income inequality is an urgent problem. Given that, economists and economic historians have been keenly interested in income distribution in recent years, and literature on this issue is growing rapidly.

Motivated by this situation in the real and academic worlds, we reconsider the dynamics of income distribution in the process of economic development. This is a classic issue that has been long and extensively studied in the field of economic history as well as development economics, but we aim at shedding a new light on it in the following three ways. First, we address this issue from a truly global perspective. Whereas existing historical studies in income distribution principally concentrate on the Western counties, we integrate the insights from China, India, Japan and South America with those from the Western countries. Second, we focus on a specific aspect of economic development, namely industrialization, which will enable us a clear comparison of those countries’ experiences. Third, we incorporate recent development of income distribution studies, including those on intergenerational income mobility. By exploring how industrialization affected the intergenerational income mobility, we will be able to advance our understandings on the long-term distributional implications of a structural change in an economy.

Organizer(s)

  • Tetsuji Okazaki President of IEHA, University of Tokyo okazaki at e.u-tokyo.ac.jp Japan

Session members

  • Robert C. Allen, New York University, Abu Dhabi
  • Luis Bertola, Universidad de la República
  • Tetsuji Okazaki, University of Tokyo
  • Tirhankar Roy, London School of Economics
  • Carol H. Shiue, University of Colorado Boulder
  • Tomoko Matsumoto, Tokyo University of Science

Discussant(s)

  • Robert C. Allen New York University, Abu Dhabi
  • Jan Luiten van Zanden University of Utrecht

Papers

Panel abstract

1st half

Class Structure and Inequality during the Industrial Revolution

Robert C. Allen

This paper measures the size and incomes of six major social classes across the Industrial Revolution using social tables for England and Wales in 1688, 1759, 1798, 1846, and 1867. Lindert and Williamson’s revisions of these tables are extended, by, first, separating servants from middle and upper class households in the tables of King, Massie, and Colquhoun, second, by estimating for the same tables of the number and incomes of women and children employed in the various occupations, and, third, by breaking down incomes into rents, profits, and employment income. These extensions to the tables allow variables to be computed that can be checked against independent estimates as a validation exercise. Gini coefficients are computed from the social tables to measure inequality. These measures confirm that Britain traversed a ‘Kuznets curve’ in this period. Changes in overall inequality are related to the changing fortunes of the major social classes.

This paper measures the size and incomes of six major social classes across the Industrial Revolution using social tables for England and Wales in 1688, 1759, 1798, 1846, and 1867. Lindert and Williamson’s revisions of these tables are extended, by, first, separating servants from middle and upper class households in the tables of King, Massie, and Colquhoun, second, by estimating for the same tables of the number and incomes of women and children employed in the various occupations, and, third, by breaking down incomes into rents, profits, and employment income. These extensions to the tables allow variables to be computed that can be checked against independent estimates as a validation exercise. Gini coefficients are computed from the social tables to measure inequality. These measures confirm that Britain traversed a ‘Kuznets curve’ in this period. Changes in overall inequality are related to the changing fortunes of the major social classes.

Who Grew Rich?: Determinants of Income Distribution and Intergenerational Mobility under Japan’s Industrialization

Tomoko Matsumoto and Tetsuji Okazaki

Industrialization is a key to economic development and overall income growth. Industrialization, however, does not increase all people’s income equally. Income inequality tends to expand in the early phase of economic development, as illustrated by the “Kuznets Curve.” Furthermore, growing literature on social mobility suggest social mobility may be lower in the period. We aim to contribute with the newly constructed individual-level intergenerational data from early twentieth century Japan under industrialization. Our data include not only income tax data but also detailed data on biographical background. Using the data, we investigate the mechanisms of income distribution and its intergenerational mobility under early stage of economic development. Our results show that the new opportunities of working on business under the industrialization provided people chances to grow rich, although the existing old social order remained.

Industrialization is a key to economic development and overall income growth. Industrialization, however, does not increase all people’s income equally. Income inequality tends to expand in the early phase of economic development, as illustrated by the “Kuznets Curve.” Furthermore, growing literature on social mobility suggest social mobility may be lower in the period. We aim to contribute with the newly constructed individual-level intergenerational data from early twentieth century Japan under industrialization. Our data include not only income tax data but also detailed data on biographical background. Using the data, we investigate the mechanisms of income distribution and its intergenerational mobility under early stage of economic development. Our results show that the new opportunities of working on business under the industrialization provided people chances to grow rich, although the existing old social order remained.

Social Mobility in the Long-Run: An Analysis with Five Linked Generations in China, 1300–1900

Carol Shiue

This paper uses a multigenerational perspective to analyze social mobility over the long-run. The data covers information on about 10,000 men who lived in Anhui Province, their wives, and their children, for seven lineages of between fourteen to twenty generations. Among the more than 40,000 individuals in the sample, the earliest recorded birth is in the year 1298, and the last recorded death is in the year 1925. The results show that educational inequality is closely related to changes in mobility over time. Consistent with social and institutional trends during this period, times of greater inequality among men in the father’s generation are times of less mobility in the son’s generation. Heterogeneity in mobility over the distribution of status and asymmetry of mobility at the top and bottom contributes to this observed correlation. I next examine whether lineal or non-lineal effects are more important to son outcomes. The results show...

This paper uses a multigenerational perspective to analyze social mobility over the long-run. The data covers information on about 10,000 men who lived in Anhui Province, their wives, and their children, for seven lineages of between fourteen to twenty generations. Among the more than 40,000 individuals in the sample, the earliest recorded birth is in the year 1298, and the last recorded death is in the year 1925. The results show that educational inequality is closely related to changes in mobility over time. Consistent with social and institutional trends during this period, times of greater inequality among men in the father’s generation are times of less mobility in the son’s generation. Heterogeneity in mobility over the distribution of status and asymmetry of mobility at the top and bottom contributes to this observed correlation. I next examine whether lineal or non-lineal effects are more important to son outcomes. The results show that although mobility is a multigenerational process, the lineal impact of grandfathers and older generations is overshadowed by non-lineal interactions coming from higher status men in the same generation as the father.

What Do We Know about Trends in Inequality in Colonial India (1857-1947)?

Tirthankar Roy

Indian economic history suggests two hypotheses on trends in inequality. Colonial India maintained free markets for commodities, skills, and capital until the interwar period. Any market-led economic change is likely to be unequal, it favours those with goods and skills the world market demands. Those livelihoods which do not trade much could fall behind, even suffer. This is the economic hypothesis on inequality and predicts a rise in inequality over time. The alternative hypothesis is that British India inherited from the Mughals a state system that rewarded the elite officers with very high salaries. This, the political, hypothesis should predict a fall in inequality as more Indians filled up administrative posts. Which one of these theses is more consistent with available data?

Indian economic history suggests two hypotheses on trends in inequality. Colonial India maintained free markets for commodities, skills, and capital until the interwar period. Any market-led economic change is likely to be unequal, it favours those with goods and skills the world market demands. Those livelihoods which do not trade much could fall behind, even suffer. This is the economic hypothesis on inequality and predicts a rise in inequality over time. The alternative hypothesis is that British India inherited from the Mughals a state system that rewarded the elite officers with very high salaries. This, the political, hypothesis should predict a fall in inequality as more Indians filled up administrative posts. Which one of these theses is more consistent with available data?

Viewed up Close, Nobody is Normal: Industrialization and Income Distribution in Latin America

Luis Bertola

The relation between growth and distribution in Latin America has been a topic of lively debate, due to the well-known high Latin American inequality and relative backwardness. The timing of the appearance of high income inequality has also been a topic of debate. While some scholars argue that inequality is rooted in the colonial period, others mention industrialization as the real source of high income inequality. The paper will present a typology of patterns of industrialization and income distribution in Latin America. First, the timing of industrial growth and industrialization will be discussed. Second, the patterns of industrialization will be approached. Third, the evidence on income distribution will be summarized. Fourth, the evidence on welfare systems will be considered. The typology presented will put together all these components. The paper will try to show, mobilizing a wide range of available evidence, that, in spite of some common features, the Latin...

The relation between growth and distribution in Latin America has been a topic of lively debate, due to the well-known high Latin American inequality and relative backwardness. The timing of the appearance of high income inequality has also been a topic of debate. While some scholars argue that inequality is rooted in the colonial period, others mention industrialization as the real source of high income inequality. The paper will present a typology of patterns of industrialization and income distribution in Latin America. First, the timing of industrial growth and industrialization will be discussed. Second, the patterns of industrialization will be approached. Third, the evidence on income distribution will be summarized. Fourth, the evidence on welfare systems will be considered. The typology presented will put together all these components. The paper will try to show, mobilizing a wide range of available evidence, that, in spite of some common features, the Latin American countries show different patterns of inequality and different impacts of industrialization on distribution. Moreover, it will show that different conformations of welfare regimes, as well as other institutional features, widened the differences between the studied countries.

2nd half

Comments

Robert C. Allen

Comments

Jan Luiten van Zanden

Discussion

Open discussion.

Open discussion.