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INCOME DISTRIBUTION IN INDIA.   Term Paper ID:24995 Click to get this paper

Essay Subject: Examines statistics, causes of differences, class, population quintiles, economic policy, trade, child labor, politics. Tables.... More...

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Paper Abstract: Examines statistics, causes of differences, class, population quintiles, economic policy, trade, child labor, politics. Tables. Paper Introduction: INCOME DISTRIBUTION IN INDIA: AN ANALYSIS Introduction This research examines income distribution in India. To the extent possible, income distribution is considered within the context of class differentials, wherein class is defined as low-, middle-, and high-income groups. For the greater part, however, income distribution is considered within the context of population quintiles, as it is in this form that the reliable data on income distribution of collected and published by organizations such as the World Bank. Factors that explain income distribution patterns in India also are addressed. Income Distribution in India India is a massive country with a huge population. Almost one-billion people (929.4 million in mid-1995) reside in a country Text of the Paper: The entire text of the paper is shown below. However, the text is somewhat scrambled. We want to give you as much information as we possibly can about our papers and essays, but we cannot give them away for free. In the text below you will find that while disordered, many of the phrases are essentially intact. From this text you will be able to get a solid sense of the writing style, the concepts addressed, and the sources used in the research paper. F. The Indians fare better than the Americans, however, with thelowest 4 percent of the Indian population within the context of incomereceiving 2 .6 percent of the total national income, and with the lowest 4 percent of the American population within the context of income receivingonly 15.7 percent of the total national income. In 1917, the American Federation of Labor (AFL) demanded that thepeace treaty that would end the First World War should include a provisionstating no article or commodity shall be shipped or delivered ininternational commerce in the production of which children under the age of16 have been employed or permitted to work. Income distribution in India becomes even more skewed when a directcomparison is made between the lowest income groups and the highest incomegroups in the population. Rather, in the contemporary international economicenvironment, most global corporations appear to be attempting to replaceskilled labor in the developed countries with skilled labor in thedeveloping countries. Martin's Press. Thus, in India, childlaborers are found most frequently working in agriculture, constructionmaterials, stone quarries, and in cottage industries such as carpet weavingand the glass industry. Storm, S. Child labor in India is concentrated (92 percent) in 11 states. General introduction. Freer trade is widely held toimprove the lot of developing countries by not only improving generalincome levels in those countries, but also by reducing the income disparitybetween skilled workers and laborers in developing countries (Ekelund &Hebert, 1996). For most developing countries, thistheory posited that skilled labor income would suffer to a greater extentthat would unskilled labor income in the wake of freer trade. The Indian government, however, did propose polices in 1993 that weredesigned to promote greater equality in income among seven income classesdefined for the country. Satyarthi, K. Where children work: Child servitude inthe global economy. Structured social inequality. One important problem within the context of this policy dilemmaappears to be the mistaken assumption that global corporations are seekingto gain advantages through the exploitation of unskilled labor indeveloping countries. A history of economic theoryand method. Incomedistribution refers to the proportional share of economic benefits receivedby the different segments comprising an economy. Income Distribution In India: An Analysis Introduction This research examines income distribution in India. The development of public policy regardingincome distribution must accord consideration to each of the variousperspectives on the issue, while simultaneously, addressing the underlyingpolitical imperatives (Birnbaum & Rogers, 1989). (1997). Those who promote equal opportunity on the grounds that economicefficiency will be promoted at the same time are stating in effect thatexisting resource allocations are not economically efficient. At this rate of growth, India's population will exceed one-billion by the end of 1999, and will increase further to more than 1.1billion by 2 15. Christian Century, 112, 362-365. They impose costs oncompanies trying to compete in the global economy. Initially, the theory was basedon labor-cost differentials. The higher per capita incomes are found inthose states where industry was developed earliest (Cashin & Sahay, 1996).This proposition, however, does not address disparities in incomedistribution within relatively prosperous states. (1995, 27 January). Child laborers inIndia account for almost one-half of this global total. Such anoutcome would narrow the income spread between skilled and unskilled laborin such developing countries (Ekelund & Hebert, 1996). Thus, the rationale of extant international economicpolices is becoming irrelevant. Conclusion Income distribution among incomes classes in India is skewed in favorof the higher income groups. Economics of poverty, inequality, anddiscrimination. The German ideology.New York: International Publishers. the ideas of those who lack themeans of mental production are subject to it" (Marx & Engels, 1846). By contrast, the high-income groups (the highest quintile) fare well in each country, with thetop 2 percent of the Indian population within the context of incomereceiving 42.6 percent of the total national income, and with the top 2 percent of the American population within the context of income receiving41.9 percent of the total national income. The major formal barriers to international tradeare tariffs and quotas. EarlyMarxism defines classes as wage laborers, capitalist, and land owners.Later Marxist interpretations, however, recognized that some degree ofblurring frequently occurs between these classes. Journal of Development Economics, 52(1), 83-119. The Marxist interpretation of theconflict paradigm is made within the concept of class struggle. Compa, L. The absence ofeither the ability or a willingness of industrial countries to deny marketdevelopment for the products of child labor, however, actually encouragethe use of child labor in India. Mosttrade barriers are imposed by national governments, although they are mostoften imposed at the insistence of or with the support of domestic industryand labor organizations. The definition ofsegments tends to shift (based on the perspective of the examination), andthe composition of segments tends overlap as the perspective changes.Economists often distinguish between the owners of capital and labor inconsiderations of income distribution, while social activists are more aptto be concerned with the distribution of income between the wealthy and thepoor, white and non-white, and male and female, and tax planners areinterested in income distribution according to population-income quintiles(Ekelund & Hebert, 1996). Ekelund, R. (1996). (1997). (1995, Summer). Harvey, P. In the 199 s, it is recognized that bothsupply and demand factors are at work in the determination of relativeprices which establish a basis for a mutually advantageous exchange betweencountries. The basic model of international trade is structured around theconcept of comparative advantage. Thus, some progress with respect to income isoccurring in spite of the massive population growth. (1997, February). One of themost effective actions that India could take to reduce income distributiondisparities is the elimination of child labor. % |17.4% |25. Thus, the lower house,Lok Sabha (House of the People), holds the supreme governmental power inthe country. Disparities in labor rights and laborstandards clearly affect international trade and investment choices. Such amarket may be either domestic or foreign in locus. A study by the United States Congressional Research Serviceconcluded it would be "GATT-illegal" to bar products from entry into theUnited States market only because they were produced by children (Harvey,1995). Hasnat, B. Income distribution according to populationquintile is presented in Table 1, which may be found below on this page.Data for the United States are included in the table for comparativepurposes.Table 1Income Distribution By Quintile in India and the United States|Country |Lowest 2 % |Second |Third |Fourth |Highest 2 %|| | |Quintile |Quintile |Quintile | ||India |8.5% |12.1% |15.8% |21.1% |42.6% ||United |4.7% |11. 1-8. The conflict paradigm describes social life as a struggle amongcompeting individuals and groups. Another important factor that helps explain the income distributiondisparity in India is the widespread use of child labor in India. While there may be short-term disruptions for affected workers orcommunities, in the long run transfers to more efficient operations makefor a more dynamic, growing global economy, according to free-marketapologists who conveniently ignore such practices as child labor, unless ofcourse the practice occurs within a socialist economy. The income distribution disparities in India,while great, however, are not alarmingly different from comparable incomedistribution disparities that prevail in the United States. A quota also seeksto restrict the flow of goods into a country. One reason, therefore, for the continuingincome disparity in countries such as India, therefore, is that theglobalization of trade is working to the advantage of skilled labor to thedetriment of unskilled labor. Labor rights and labor standards ininternational trade. The tragedy of child labor.Multinational Monitor, 15, 24-25. Real equality of opportunity will not occur, however,until such time as the great majority of individuals and organizationswithin a society voluntarily behave in a socially responsible manner.Within the Marxist interpretation, the inequalities and the conflict willcontinue as long as one group attempts to maintain an inequitable balancein employment. The theory is based on anassumption that different countries have different quantities of thefactors of production-land, raw materials, labor, and capital. Population in India currently is increasing at the rate of 1.8 percentper year. Requirements for equalitymay be legislated and those requirements may be enforced with some degreeof effectiveness. In India, children, for the most part, work in export-orientedindustries, where profit margins are highest. In the wake of theelection, the National Front-Left Front (NF-LF) coalition will form agovernment with the support of the Congress Party. NewYork: St. While the political instability prevents Indian from takingpositive actions to end income disparities in the country, there is noevidence in India's past that such actions would be taken if politicalstability prevailed. Dahrendorf, R. Because it is held that international trade increases the scope oflabor specialization, and achieves economies of scale through theenlargement of markets, most economic theory holds that international tradeshould be free of artificial restrictions. In spite of significant changes in economic thought since theeighteenth century, the theory of comparative advantage still stands as anexample of sound economic reasoning. (1995, June). They maintain thathigh wages and strong protections usually mark advanced economies withstable democracies, competent judiciaries, reliable telecommunication andtransportation systems, skilled labor and a working class that enjoysmiddle class purchasing power. The specific factor-price equalization theory holds that, underabsolutely free international trade, not only the prices of tradedproducts, but also the prices of the factors of production, will beequalized among the trading countries (Ekelund & Hebert, 1996). Conflicttheory is a sociological proposition offered as an alternative tostructural-functional theory (Heller, 1995). While the country's population is growing at an annualrate of 1.8 percent, GDP in India is growing at an annual rate of 3.2percent (World Bank, 1997). While child laborers are found most often insmaller enterprises, child laborers have also been used in a bottling plantof Coca-Cola and in the tea fields of Unilever in India (Satyarthi, 1994). India is a parliamentary democracy. The rights of childrenwere not agreed upon, except to note that they must be educated andprotected (Hasnat, 1995). The estimate is that 52.5 percent of thepopulation in India have annual incomes below the poverty level (WorldBank, 1997). Kamm, L. Income distribution within the context of thehighest and lowest incomes classes in the country population is presentedin Table 2, which may be found below on this page. New York: McGraw-Hill Book Company. Second, equal opportunity is promoted on the groundsthat it promotes economic efficiency. This contention, however, is notuniversally accepted by employees, employers, or economists. New York: OxfordUniversity Press. Journalof Economic Issues, 29, 419-426. H., & Rogers, D. India is a republic and frequently is referred to as the world'slargest democracy. It does so through a directrestriction on the number of items which may be imported, however, asopposed to an attempt to price the goods out of the market (Ekelund &Hebert, 1996). In Heller, C. (Ed.). To an extent, this proposition is borne outin India, where there exists a highly diverse per capita income spectrumacross the several states. The theory of comparative advantageholds that mutually advantageous trade between countries will always beavailable, because trade patterns will be based on relative prices, asopposed to absolute prices, which is based on the theory of absoluteadvantage, wherein mutually advantageous trade between countries might notalways be possible (Ekelund & Hebert, 1996). Domestic constraints on export-led growth:A case study of India. Workers and unions take a different perspective. As the data presented in Table 1 indicate, the income distributionrage in the United States is somewhat narrower than that in India; however,the major difference is that the middle-income classes (the third andfourth quintiles) in the United States fare much better than those incomeclasses in India, gaining a 42.4 percent share of total national incomecompared with a 36.9 percent share for these classes in India. The reasoning behind thetheory of comparative advantage is that no single country can havecomparative advantage in all commodities. In effect,the Heckscher-Ohlin theory explains why the theory of comparative advantageis valid. Thus, this economic causal factor is linked directly tointernational trade. Providing equal opportunity to minority groups within a society ismore a social issue than it is a legal issue. To the extent they disciplinegovernments into easing burdensome labor regulations, such transfer mayalso promote more efficiency in the production process" (Compa, 1993, p.166). The most recent experience ofmany developing countries has not conformed to the various internationaleconomic theoretical predictions, however, and the validity of many of theessential policies upon which international economic development is beingbased are being called into question (World Bank, 1997). From the investor'sstandpoint, these costs could be minimized or avoided in countries withlower standards or less stringent enforcement of labor rights and laborstandards. Cashin, P., & Sahay, R. As the data presented in Table 2 indicate, the spread in incomedistribution between the lowest income class (the lowest 1 percent) andthe highest income class (the highest 1 percent) is greater in India (24.7percent) than in the United States (23. Data for the UnitedStates are included in the table for comparative purposes.Table 2Income Distribution By Highest and Lowest Income Classes in India and theUnited States|Country |Lowest Income Class |Highest Income Class || |(Lowest 1 %) |(Highest 1 %) ||India |3.7% |28.4% ||United States |2. New York: Macmillan PublishingCompany, pp. The recent experience of globalization has not supportedthis tenet of economic theory, as the income disparity between skilledworkers and laborers in developing countries has been widening in the wakeof the increased globalization of the international economy (World Bank,1997). This argument holdsthat those areas that are industrialized early in a country's economicdevelopment will not only hold an income advantage, but will also widenthat advantage (Wolff, 1997). Finance and Development, 33(1), 49-52. Marx, K., & Engels, F. Assessments of the plan's test implementationfound the results to be disappointing (Storm, 1997). Factors that explain incomedistribution patterns in India also are addressed. "The class which has the means ofmaterial production at its disposal, has control at the same time over themeans of mental production, so that ... Explaining Income distribution Patterns in India Poverty in a society is a function of income distribution. Proponents of conflict theorycontend that structural-functional theory either neglects the empiricalfact that conflicts of value and interest or inherent in all forms of humansociety or treats such conflicts in only a secondary context (Dahrendorf,1995). Capital-gains taxfight causes some liberals and conservatives to switch usual alliances.Wall Street Journal, A24. B., & Hebert, R. For the greater part, however, income distribution is consideredwithin the context of population quintiles, as it is in this form that thereliable data on income distribution of collected and published byorganizations such as the World Bank. From the standpoint of international investors seeking to maximizeprofits, strong worker protections curb the most efficient use of labor andcreate disincentives to invest. (1846; reprinted 1942). Income Distribution in India India is a massive country with a huge population. From the time of the establishment of the republic in 1949, theCongress Party dominated the national government in India until the mostrecent general election which was held in May 1996. The difference,however, is slight, which may surprise many people in the United States tolearn how near their country is to a Third World income distributionpattern. New York:Macmillan Publishing Company, pp. According to otherestimates, however, the number of child laborers in India ranges upward to55 million Hasnat, 1995; Harvey, 1995). (1995, 5 April). (1994, October). (4th ed.). % | Source: World Bank, 1997. Equal opportunity in relation to employment is advocated for tworeasons. % |41.9% ||States | | | | | | Source: World Bank, 1997. Barriers to trade are obstacles whichprevent goods and services from moving freely between countries. Minimum wage requirements, child laborlaw, occupational safety and health standards, job security rules, unionorganizing rights and collective bargaining obligations all interfere, to agreater or lesser degree, with pure market forces. Wolff, E. (4th ed.). The primary causal economic factor of the use of child labor in Indiais the existence of a market for the products of child labor. Differences in labor rights and labor standards among countries atvarying levels of development are growing in importance as a factor ininternational trade (Compa, 1993). Law and Policy in International Business, 25, 165-191. Since that time,additional political instability has characterized the Indian politicalenvironment, with the NF continuing to lead government in a minoritystatus. The lower-income classes (the lowest and second quintiles) in both countries farepoorly. World Bank. In the May 1996election, no single party gained a majority in the Lok Sabha, and theCongress Party finished second to the Bharatiya Janata Party, whichadvocates a nuclear power status for India. J. According to ILO,India has more than 44 million child laborers. Opponents contend that theBharatiya Janata Party, were it allowed to form a government, would openlydiscriminate against Muslims among India's population. (1989, 27 September). Conversely,those who hold that improvements in equal opportunity must be gainedthrough losses to others in the economy are stating in effect that existingresource allocations are economically efficient, and that gains in equalopportunity must involve tradeoffs with economic efficiency and must beprovided at the expense of someone else. 421-43 . (1995). References Birnbaum, J. Social structure, group interests, and conflictgroups. The linking of international trade and child labor is not a new idea.Calls for the elimination of child labor worldwide first came from laborunions. A country will highlevels of skilled labor will gain from increased trade; however, a countrywith high levels of unskilled labor will experience losses for skilledlabor in the wake of free trade. Such blurring betweenclasses provides a basis for the analysis of the affirmative action conceptwithin the context of the Marxist interpretation of conflict theory, asdominant gender, racial, and ethnic population groups may be regarded asthe owners or at least the possessors of a valuable societal resource-thebetter paying jobs in a society. S. (1993, Fall). The Heckscher-Ohlin theory holds that a country will tend to exportthe commodities that use relatively more of the factors of production whichare relatively more abundant in that country. Conflict theory also may be used to explain both the development andthe continuation of income distribution inequalities in India. Child labor feeds global market profits.National Catholic Reporter, 1 -11. Regional economic growth andconvergence in India. It is designed torestrict the flow of goods into a country, by causing them to be tooexpensive to compete with domestically produced goods. Income distribution in India is highly skewed in favor of the higherincome groups in the country. TheInternational Labor Organization (ILO) estimates that at least 115 millionchildren under the age of 15 are employed worldwide. percent). For the products of theuse of child labor in India, however, such markets tend to be foreign inlocation. The omission is especially significant because the agreementhampers countries from attempting to ban the import of products made bychild labor. If this latter contention werewidely accepted in society, it is likely that instances of employmentdiscrimination would drop dramatically. India: Child labour some staggering statistics. S.Structured social inequality. S. The per capita gross domestic product (GDP) in India of US$34 indicates that only a comparatively small proportion of the population willbe well-off economically. The AFL took the proposal tothe Labor Commission but failed to obtain its inclusion in the Treaty ofVersailles. (1997). In fact, the poorest of the poor in the United States are worse-off in terms of income distribution than are the poorest of the poor inIndia. The country is comprised of 25 states and seventerritories. Hunter, B. International trade and child labor. (1995). Thesestates are Andhra Pradesh, Madhya Pradesh, Uttar Pradesh, Maharashtra,Bihar, Karnataka, West Bengal, Orissa, Rajasthan, Gujarat, and Tamil Nadu"India: Child Labour Some Staggering Statistics," 1995). "Fed up with 'burdensome' labor standards, many companies shiftoperations to countries with what they feel is a more favorable investmentclimate-lower wages, weaker unions and less regulations of industry. The nation's Prime Minister is elected by the Lok Sabha.Representatives to the Lok Sabha are elected by democratic vote (Hunter,1997). Cincinnati, Ohio: South-Western College Publishing. Freemarket theorists would call such transfers beneficial, reflecting acomparatively advantageous use of labor. The failed draft charter for the International Trade Organization(1947) proposed, among others, a minimum age for employment. WINNews, 21, 65. The Stolper-Samuelson theory predicts that removing trade barrierswill have different effects in different countries. This action, if successful, would remove, in part, the primaryeconomic causal factor of the use of child labor in India. When theGeneral Agreement on Tariffs and Trade (GATT) became the de facto forum fortrade negotiations, fair labor standards and its provisions were relegatedto the United Nations Declaration of Human Rights. The largest trade agreementin history, the Uruguay Round of the GATT, however, does not mention childworkers. The Congress of Industrial Organizations (1943), the TextileWorkers Union of America (1945), and the British Trades Union Congress (mid-195 s) continued to press for international treaties to prohibit themovement of goods produced in violation of international labor standardsincluding child labor (Hasnat, 1995). In the long run, these conditions make forgreater productivity and growth in the global economy (Compa, 1993).Investors should find such conditions desirable rather than running awayfrom them. % |25. This objective isconsistent with Marxist theory, and this objective is pursued throughaffirmative action. Heller, C. The work of India's children work contributes substantially to theprofits of transnational trade (Kamm, 1995). The Statesman's Year-Book, 1997-1998. N. (1996, March). World development report, 1997. One of the most pressing economic policy issues in the emerging globalor international economy is the realization that cherished economic theoryis not producing the projected outcomes. Almost one-billionpeople (929.4 million in mid-1995) reside in a country of 3,288 squarekilometers. (4th ed.). In Heller, C. Arguments have been advanced to hold that regional income differencesare a manifestation of economic development over time. A tariff is an import tax. First, equal opportunity promotes distributive justice-theunfairness of an existing situation would be remedied. To the extentpossible, income distribution is considered within the context of classdifferentials, wherein class is defined as low-, middle-, and high-incomegroups. Such countries become tempting targets for new investment aimedcost-saving systems (Compa, 1993). The ability of a country to deny the importation of the products ofchild labor could be used to preclude the development of a market for suchproducts. If this paper is not what you are looking for, you can search again: Search for: or Click here to request an essay written just for you.