id21 classic highlights

Redistribution with growth

Redistribution with growth explores ways in which macroeconomic growth can be combined over time with measures of redistribution to improve employment, reduce poverty and achieve more equitable income distribution.

Professor Sir Hans Singer first developed this idea, on the ILO Employment Mission to Kenya which he led jointly with Richard Jolly in 1972. The concept was then developed further in a joint study two years later by the Institute of Development Studies (IDS) and World Bank: Redistribution with Growth. Although income distribution had been on the IDS agenda from the beginning, the IDS-World Bank study represents one of the few times that the World Bank dealt with income distribution in the first 50 years of its existence.

The World Bank has recently given more attention to income distribution, notably in its World Development Report 2006: Equity and Development. Nonetheless in terms of policy, the World Bank and International Monetary Fund still mostly argue that speeding up the rate of economic growth is the most important condition for accelerating poverty reduction and achieving the Millennium Development Goals.

Redistribution with Growth argues, however, that we should discard the 'conceptual separation between optimum growth and distribution policies that lies at the heart of traditional welfare economics. For poorer countries, at least, it should be replaced by a development strategy with growth implications for different groups of people that can be modified by fiscal measures within fairly narrow limits.'

Redistribution with Growth explores this broader, bolder view. It analyses ways in which redistribution can be combined with economic growth to increase people's income levels and their share of national income much faster than by growth alone.

Redistribution can be achieved in several ways:

• by direct transfer of income from richer to poorer groups
• by taking a share of the income which would otherwise accrue to richer groups who benefit from growth, and transferring it by taxation (or some other mechanism) into income transfers to benefit poor people directly
• by channelling some of the increments of economic growth into investments in agriculture or education and health which would increase the productive capacity, production and incomes of the poorer groups of the population
• by redistributing land or other assets in favour of poorer groups.
  

The IDS-World Bank study explores different variations of these strategies. It shows the weakness of the first for poorer countries and favours the third with its focus on investment. The study included brief case studies of five countries - Cuba, Tanzania, Sri Lanka, Korea and Taiwan - each of which showed variations of these four strategies. More recently, Malaysia, Mauritius, Costa Rica, Barbados and Botswana have all adopted one or other of these strategies.

In 1972 in Kenya, Singer and Jolly proposed redistribution from growth, a variation, which we can see is related to the third strategy above. They proposed that the incomes of the richest one percent of Kenya's population should remain constant in real terms for ten years or so; the income which would otherwise have accrued to this group would be channelled into education, health and productive investments to benefit the poorest 40 percent of the population directly. They showed that this would almost have doubled the incomes of the poorest people - rather than a 40 percent increase with growth but unchanged income distribution. And it would do so in ways which would strengthen the capacity of the poorest groups to sustain their incomes over the longer term.

Although Kenya failed to achieve either growth or redistribution over the subsequent two decades or so, the ILO report was highly influential in the 1970s - a pioneering representation and analysis of the need for development strategies which combine growth with redistribution, as opposed to pursuing either alone.

Contributor(s)
Richard Jolly

Further Information
Richard Jolly
Institute of Development Studies
University of Sussex
Brighton
BN1 9RE, UK
Tel +44 (0)1273 606261
Fax +44 (0)1273 621202
Email R.Jolly@ids.ac.uk

Source(s)
Employment, Incomes and Equality: a strategy for increasing productive employment in Kenya, by Hans Singer and Richard Jolly, ILO, Geneva, 1972 (Link to full article forthcoming)

Redistribution with Growth: a joint study by the World Bank's Development Research Centre and the IDS at the University of Sussex by Hollis Chenery, Montek S.Ahluwalia, C.L.G. Bell, John H. Duloy and Richard Jolly, Oxford University Press: London, 1974

July 2006

See also

Redistribution With Growth – A Reply by Richard Jolly, IDS Bulletin 7.2, 1975

Richard Jolly (1934 - ), A brief biography on the UN Intellectual History Project website

World Development Report 2006, Equity and Development, Oxford University Press, New York, 2005

What do you think of this article? How have these ideas influenced your work? Email id21classics@ids.ac.uk with your comments