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The marginal utility of income transfers to the Third World

Published online by Cambridge University Press:  22 May 2009

Bruce Russett
Bruce Russett
Affiliation:
Professor of Political Science at Yale University, and Editor of the Journal of Conflict Resolution. He is past President of the Peace Science Society (International), and is currently directing the Yale Dependence Project.
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Abstract

Three different methods are used to estimate the loss and gain in fulfillment of basic needs, for industrial and less developed countries, from possible global transfers of income. Focusing on prospective changes in life expectancy and infant mortality rates, the gain attributable to a given income increment for a person in a very poor country is on the order of seventy-five times greater than the loss to be expected for the average person residing in a rich country. Benefits to the poor are greater if income is distributed relatively equally within poor countries. Income transfers designed to meet basic needs would help to reduce birth rates in poor countries. The prospective gains in basic needs from the transfers are sufficiently large to exceed prospective losses from disruption of the global economy caused by the transfers. Fundamental questions of justice are thus raised.

Type
Articles
Information
International Organization , Volume 32 , Issue 4 , Autumn 1978 , pp. 913 - 928
Copyright
Copyright © The IO Foundation 1978

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References

1 See, for example, Lasswell, Harold and Kaplan, Abraham, Power and Society: A Framework for Inquiry (New Haven: Yale University Press, 1950)Google Scholar; Galtung, Johan et al. , “Measuring World Development,” Alternatives 1, 1 (1975): 131–58CrossRefGoogle Scholar; and Maslow, Abraham, Toward a Psychology of Being (Princeton: Van Nostrand, 2nd edition, 1968)Google Scholar. Note Herrera, Amilcar et al. , Catastrophe or New Society? A Latin American World Model (Ottawa: International Development Research Centre, 1976), p. 53Google Scholar: “Life expectancy at birth is without a doubt the indicator that best reflects general conditions of life regardless of country. Its value is a function of the extent to which the basic needs are satisfied. …” For the development of a composite Physical Quality of Life Index including life expectancy at birth, infant mortality, and literacy rate, see Sewell, John et al. , The United States and World Development: Agenda 1977 (New York: Praeger, 1977), pp. 147–54Google Scholar.

2 The data in Figures 1 and 2 are from Hansen, Roger D. et al. , The United States and World Development: Agenda for Action, 1976 (New York: Praeger, 1976), pp. 132–41Google Scholar. I discussed this procedure in Duvall, Raymond and Russett, Bruce, “Some Proposals to Guide Research on Contemporary Imperialism,” Jerusalem Journal of International Relations, 2, 1 (1976): 1–27Google Scholar; and in Russett, Bruce M., “Hur fattiga maste de fattiga vara?” Rapport fran SIDA 6, 7 (1975): 3–5Google Scholar. It is basically the same as I employed in Russett, Bruce et al. , World Handbook of Political and Social Indicators (New Haven: Yale University Press, 1964), pp. 299–301Google Scholar. The same procedure has been used by Köhler, Gernot and Alcock, Norman, “An Empirical Table of Structural Violence,” Journal of Peace Research 13, 4 (1976): 343–56CrossRefGoogle Scholar, taking off from a suggestion by Galtung, Johan and Høivik, Tord, “Structural and Direct Violence: A Note on Operationalization,” Journal of Peace Research 8, 1 (1971): 73–76CrossRefGoogle Scholar. Köhler and Alcock, however, are primarily concerned with the number of deaths occurring globally as a result of the deviation of the worldwide income distribution from perfect equality; here we attempt to measure the welfare effects of certain identifiable reductions in income inequality. Also see the careful work of Høivik, Tord, “The Demography of Structural Violence,” Journal of Peace Research 14, 1 (1977): 59–74CrossRefGoogle Scholar.

3 This is similar to the coefficient that may be inferred from Köhler, and Alcock, , op. cit., allowing for the fact that they are using GNP per capita data for 1965Google Scholar.

4 Here and in the following figure, separate regression coefficients were computed for countries with per capita GNP below $600 and for countries above $1800. At each of these levels a linear relationship (though different) provides a good fit. Between $600 and $18001 have joined the two lines with a curve to estimate that portion of the relationship. The linear coefficients are referred to in the text. In computing the coefficients all OPEC countries were omitted; as explained in the text they are special cases.

5 Income inequality data from Hansen, et al. , op. cit., pp. 148–49Google Scholar, show Sweden as less egalitarian than the United States. This does not, however, agree with the opposite (and more generally accepted) conclusion of OECD studies (e.g., Sawyer, M., “Income Distribution in OECD Countries,” OECD Economic Outlook 07 1976: 3–36)Google Scholar which show the United States as less egalitarian than all or nearly all of twelve major industrialized countries. I have since replicated part of this analysis on a subset of less developed countries with very carefully compiled data. It appears that conditions of well-being (life expectancy and infant mortality) can be well predicted (R2 = .42) by acombination of GNP per capita and equality of income distribution, with income inequality contributing roughly one-third of the predictive power.

6 For the two regression lines in Figure 1, the R2s were, respectively, .36 and .22; here they are .46 and .25.

7 Kitagawa, Evelyn and Hauser, Philip, Differential Mortality in the United States: A Study (Cambridge: Harvard University Press, 1973)CrossRefGoogle Scholar.

8 Ibid., p. 28.

9 Ibid., p. 180.

10 In a new analysis, Alcock, Norman and Köhler, Gemot, “Structural Violence at the World Level: Diachronic Findings” (Oakville, Ontario: Canadian Peace Research Institute, 1977, mimeo.)Google Scholar report that both synchronic and diachronic analyses show virtually the same relationship between wealth increments and life expectancy. The relationship is much stronger for poor countries than for rich ones, but very similar within each subgroup, whether examined diachronically or synchronically. The reasons for the similarity (where we found a stronger diachronic relationship) are not clear, but may be an artifact of their use of GNP per capita in the synchronic analyses and energy consumption as the wealth measure in their diachronic analyses.

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12 Rawls, John, A Theory of Justice (Cambridge, Harvard University Press, 1971), p. 114Google Scholar. For further relevant ethical considerations see Brown, Peter G. and Shue, Henry, eds., Food Policy: The Responsibility of the U.S. in the Life and Death Choices (New York: Basic Books, 1977), espGoogle Scholar. the contributions by Peter Singer, Thomas Nagel, Peter Brown, and Victor Ferkiss.

13 Herrera et al., op. cit.

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16 In 1973 prices; Sewell, et al. , op. cit., p. 67Google Scholar.

17 Here, as elsewhere, we still cannot fully specify the mechanism by which our variables are related. It is clear, for example, that education is related (negatively) to rates of population increase as it is to life expectancy and low infant mortality. Some of the effects of these variables that we may seem to attribute to income are surely attributable more directly to education. Nevertheless, it is very difficult to sort out the separate effects, and the correlations of such variables as literacy with population growth, life expectancy, etc., are not systematically higher than are the correlations of GNP per capita with population growth, life expectancy, etc. Note the comment by Field, John Osgood and Wallerstein, Mitchel B., “Beyond Humanitarianism: A Developmental Perspective on American Food Aid,” in Brown, and Shue, , eds., op. cit., p. 239Google Scholar. “Malnutrition, infant mortality and rampant morbidity, illiteracy and ignorance, low productivity and marginal livelihood, large family size and unresponsiveness to family planning programs cohere so strongly that they form a veritable syndrome of poverty, cultural and structural, that is highly resistant to change.” For a careful review of evidence on the “child survival hypothesis” suggesting that a drop in infant mortality is a requirement for voluntary reduction of births see the contribution by Michael F. Brewer in the same volume. Also McNamara, Robert S., “Population and International Security,” International Security 2, 2 (1977): 25–55CrossRefGoogle Scholar.

18 Ram, Rati and Schultz, Theodore W., “Some Economic Implications of Increases in Life Span with Special Reference to India,” 1977Google Scholar manuscript for a festschrift in honor of V.K.R.V. Rao.

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