Models of redistribution and economic development

The interrelationships between development and distribution have been investigated by economists from a variety of viewpoints. One group of economists introduced inter-sectoral redistributions of resources in dualistic structures and monitored the resulting consequences on the distribution of income, savings, consumption as well as the impact on growth. Another group of economists highlighted the link between the level of nutrition and the amount of labor effort in an economy having surplus manpower. A third group of economists stressed the importance of the intra-sectoral redistribution of assets in the long-run to improve the distribution and growth of income, consumption etc. However, the existing literature shows that there is very little work done to link these alternative approaches towards growth with equity. This dissertation fills this gap in the literature by interlinking the different forms of redistribution. The methodology does not follow any particular school of thought explicitly. It uses both structuralist and optimizing methods. In addition, there are both one and two sector configurations to highlight the importance of linking the inter-sectoral redistributions with the intra-sectoral. The dissertation simulates the models for twenty years to show the implications of policy alternatives. It is argued that none of the current third world countries reflects the true working of either a free market economy or a comprehensive redistributive regime presented here. One of the major goals of this dissertation is to analyze the relative advantage of a third world country in moving either towards a free market economy or a redistributive regime. The model results show that underneath the aggregate growth versus equity problem, there exists a number of important contradictions in the society. These contradictions involve conflicts within the poorer groups, between the competitive and monopoly segments, between agriculture and industry as well as those between labor and capital. Hence, the dissertation clarifies the point that economic development should aim at solving most of these contradictions, along with growth. The comprehensive redistributive regime proposed here is a better instrument in achieving this goal than the free market alternative.