POVERTY, INCOME REDISTRIBUTION, AND BASIC NEEDS: A CASE STUDY OF IRAN

Disillusionment with the results of the past three decades of economic development in the Third World countries has led many economists to advocate a development strategy which emphasizes satisfaction of basic needs as a primary goal of development. One of the the important means to achieve this end, however, is income redistribution, which is in direct contrast to the traditional thinking of "grow now, redistribute later.". The main purpose of this study is to show that income redistribution--to the extent that the basic needs of the population are satisfied--in an oil-rich country such as Iran would have very little, if any, adverse effect upon economic growth. The specific objectives of this study are: (1) To show the extent of poverty in Iran in terms of income inequality, malnutrition, education, shelter, health, and distribution of such essential services as piped water and electricity, and to find out the number of people living in absolute poverty. (2) To investigate the impact of income redistribution upon economic growth, employment, and imports, and to inquire into the subsequent trade-offs between growth and equity. In evaluating the nutritional status of the population, the Reutlinger-Selowsky methodology is used to estimate the average calorie deficiency of each decile of population in different regions. The estimate of the savings effect of income redistribution upon growth is based on the Cline methodology. A Leontief input-output analysis is used to simulate the effect of different alternatives of income distribution upon employment and imports. And finally, the "redistribution with growth" model of Chenery et al. is used to simulate the effects of different development strategies in the eradication of poverty. Despite a remarkable rate of economic growth during the 1960s and early 1970s, the empirical results of this study point to the worsening of income distribution and growing unemployment in Iran. The simulation results suggest that income redistribution could have a substantial positive effect upon employment, and point out the superiority of a basic needs strategy of development to a "trickle down" approach, both in terms of growth and equity.