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Inequality: The Political Economy of Income Distribution.

The stated aim of this book is to (1) presents an overview of the facts and problems associated with income distribution viewed from an historical, geographical, and sociological perspective, (2) develop criteria for estimating more accurately the nature and extent of income inequality, and (3) make recommendations for systematic public policy to promote continued economic growth. The book is only partially successful in reaching its stated objectives.

In a very brief overview chapter, the author points out that the study of income inequality generally face a wide variety of problems ranging from measurement, interpretation, and policy prescriptions. The author promises to develop consistent tools for measuring income inequality and to apply these tools to discover what has happened to income distribution in recent years in the United States and around the world. Chapter 2 broadly examines the meaning and causes of income inequality focusing on imperfect justice, rent, market power, discrimination, and comparative advantage. Chapter 3 is a pedagogical review of measurements of inequality ranging from the Gini index and the Lorenz' curve and various types of distribution functions. Chapter 4 concentrates on inequality in the United States and focuses on the recent trend toward increased inequalities as the result of the Reagan's misconceived supply side economics. The author begins by examining income inequality among households, families, individuals, farm versus nonfarm, and black-white inequality, and then reviews long-term trends and the effect of sex discrimination and taxation on income inequality.

In Chapter 5, the author shifts from internal income inequality (i.e., within a nation) to international income inequality among nations. He begins by pointing out the well-known difficulties in comparing international income inequalities using exchange rates to convert national per capita income into a common currency and the need to adjust that measure using Kravis, Heston, and Summers concept of Purchasing Power Parity (PPP). Still, he points out, some conceptual problems of comparability remain. In Chapter 6, the author returns to the analysis of internal income inequality in the process of economic development. After restating the Kuznets hypothesis that postulates that income inequalities first tends to increase and then to diminish in the course of economic development, he reviews empirical studies of the hypothesis and examines the question of whether the U-shaped patter of income inequality during the course of economic development is truly inevitable.

In Chapter 7 the author examines the broad consequences of increased income inequality for the kind of society in which we live. Here he wanders over a very large territory, including the effect of income inequality on population growth, education, racism, women's rights, and even land reform. In Chapter 8, the author shifts again the focus on the United States and explores in greater detail the thesis that he already presented in Chapter 4; that is, that increased income inequalities in the United States resulted from the "extreme belief in the blessings of free markets conducted without government interference" |p. 123~ and supply-side economics that resulted from it. Finally, in Chapter 8, the author points to the need to reverse the recent trend toward increased income inequalities in the United States and reviews the effectiveness of various policies that are possible to accomplish that.

All in all, I must confess that I was not impressed with this book. The author attempts to deal with both developed and developing countries, internal and international income inequality, and the causes and effects of inequality in a shallow and unrigorous way. I also would have liked to see a more in-depth discussion of the political economy of income inequality with much greater emphasis on the role of public institutions and regulations, government social services and entitlement provisions, access to capital and resources by diverse social groups, ethnicity, employment, migration, fertility levels, household earnings and consumption. Moreover, I would have not shied away from discussing some aspects of income distribution in the former centrally planned economies, including an analysis of the social wage, monopolistic supply, shortages, and rationing in determining social stratification and inequality.
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Author:Salvatore, Dominick
Publication:Southern Economic Journal
Article Type:Book Review
Date:Oct 1, 1992
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