Global inequality – levels and trends

Session organizer/s: Ellen Hillbom

Income inequality and its drivers in colonial Kenya, 1921-1960

Session: 5

Authors: Valeria Lukkari

Co-authors: Maria Mwaipopo Fibaek

Abstract: Economic development and inequality are pressing issues in the countries of sub-Saharan Africa, home to half of the top 20 most unequal countries in the world. An increasing number of studies are seeking the origins of modern-day inequalities in the colonial period. Moreover, two-sector models by Lewis and Kuznets have been used to explain historical inequality dynamics. These theories postulate that growing inequalities result from the unbalanced distribution of resources between sectors. Yet, these models have two important drawbacks. They neglect the institutional factors influencing inequality outcomes but also cannot account for the complexity and dynamism of societies. Kenya poses an interesting case study as it has been characterized as a dual economy in the pioneering research of income inequality by Bigsten (1987). The conventional understanding is that sectoral dualism together with substantial settler presence would lead to higher levels of inequality. Using primary data collected at the national archives in the United Kingdom and Kenya, this paper produces new estimates of long-run incomes for 28 social classes in Kenya and estimates the inequality between these classes. In doing so, the paper breaks down the different income groups in a more comprehensive manner, especially when it comes to the African smallholder sector. The current study, thus, refers to Bigsten’s work but adds new dimensions to the old analysis by decomposing the social classes to get further insights into racial groups, occupations, skills, and gender differences. The current paper sets out to investigate the levels and trends of income inequality in the colonial setting through the method of constructing social tables. It draws upon the sectoral and institutional theories to interpret these levels and trends of inequality and aims at disentangling which groups gained in relative terms over the period of investigation from 1921 to 1960. In this way, it addresses the two shortcomings of the two-sector models – by adding the institutional dimension and by breaking down the society in a detailed manner using the social tables method. It finds relatively low income inequality in 1921 expressed by a Gini coefficient of 0,34, which contradicts the traditional understanding of the highly polarized nature of settler colonies. The results, then, throw doubt over the dualistic structure of the colony, which had to implement coercive institutional measures in order to secure the supply of labour. The low initial levels of inequality can be explained by low levels of pre-colonial economic development, lack of pre-colonial societal inequality, and the dominance of the smallholder sector living close to subsistence. Towards the end of the colonial period, inequality, however, started increasing and the economy started showcasing signs of dualism although the most oppressive institutional measures were abandoned.

Moderate Opulence: The Evolution of Wealth inequality in Mexico in its first century of independence

Session: 5

Authors: Diego Castañeda Garza

Co-authors: NA

Abstract: This article presents the first complete 19th-century reconstruction of the Mexican wealth distribution, from independence to the Mexican Revolution. It uses an often unexploited source in Mexican historiography: will inventories/protocols. In addition, the present article estimates the levels and trends of historical wealth inequality using five different methods, among them the novel application of the properties of two theoretical parametric distributions to the measurement of historical inequality. The dynamics of wealth inequality in 19th century Mexico were dominated by the top 5% of the wealth distribution; meanwhile, the top 10% and bottom 40% demonstrate remarkable stability. This article’s main contributions are the reconstruction of historical wealth inequality combining classic and new methods, examining the distributive forces and their dynamics in a changing political economy environment, and analyzing the historical developments in light of their potential effect on the distribution of economic resources

The distributive effects of consumption taxes

Session: 5

Authors: Sara Torregrosa-Hetland

Co-authors: Oriol Sabaté

Abstract: This paper presents estimates of the distributive effects of consumption taxes in five Western countries, during the period 1910 to 1970. With this, it aims to contribute to the debate about the welfare state and regressive taxation, by going back to this formative period. We contrast the patterns in five countries representing the different welfare state models: ‘liberal’ (United Kingdom, United States), ‘conservative’ (France), ‘social democratic’ (Sweden), and ‘southern’ (Spain). Consumption taxes of different kinds (customs, general internal taxes, excises, fiscal monopolies, etc) are obtained from a detailed database (currently under construction). They are then imputed to an income distribution micro-database obtained from previous work (Torregrosa-Hetland and Sabaté, 2021a). The imputations are conducted using the relationship between income and spending in different products, estimated from historical household budget surveys. Distributive effects of consumption taxes are finally combined with those of personal income taxes which we have previously calculated.

Invisible Borders – Persisting Scars: How the Apartheid Homelands Define Contemporary South Africa

Session: 6

Authors: Peter Courtney

Co-authors: NA

Abstract: I utilise a regression discontinuity design (RDD) to examine the long-run persisting welfare reductions caused by the Apartheid homelands (1948-1994). The homelands were the only areas in Apartheid South Africa where Black African people could reside and own land. I estimate the contemporary geographic pattern of welfare reductions caused by the homelands by identifying a second-best counterfactual population through an RDD estimator. I present a novel improvement to naïve counterfactual identification in spatial RDDs. The results indicate that the homelands have caused a long-run and persisting reduction in education attainment (decreasing the school completion rate by 2.17%) and a reduction in education inputs (increasing students per teacher by 7.66%), while also reducing the size of schools. The results further show that the homelands have caused long-run population density to double and that homelands-specific erosive agricultural practices have reduced contemporary topsoil quality. In an economic history background analysis, I highlight the role of the following as likely causes of the contemporary pattern of spatial inequality: the limited size of the homelands, denaturalization, the migrant labour system, parent absenteeism, Apartheid rural policy (including ‘influx control’ and ‘Betterment’), ‘Native Law’, Bantu education, and property dispossession. I compiled a novel homeland-specific geographic data set to conduct this research.

Understanding wage discrimination in a settler colony: Khoesan wages in nineteenth century Cape Colony

Session: 6

Authors: Erik Green

Co-authors: Calumet Links

Abstract: Scholars have extensively studied gender discrimination in various historical and contemporary labour market settings (Boserup 1970, Goldin 1990, Alesina et al 2013). This body of literature has expanded our knowledge of both the origins of gender division of labour and the impacts thereof on developmental outcomes (Humphries 1990). Similarly, it is widely accepted that indigenous populations in colonised regions were discriminated against in colonial labour markets (Ceron et al 2016, Button et al 2020). In this paper, we illustrate these two observations by utilising a unique micro-level wage data set for the indigenous Khoesan agricultural labourers of the early nineteenth century Cape colony (1800 to 1810). The data set contains information about the size of payments, form of payment (in-kind or cash), labour tenure for both male and female labour. and provides the ages for each labourer. The first aim of this paper is therefore to examine whether indigenous Khoesan labour was compensated above or below subsistence level by colonial settler farmers. Secondly, our aim is to assess the degree to which wage discrimination between male and female indigenous labourers occur, through comparing the sizes of payments, form of payment and labour contracts.

What we gained that time we lost so much

Session: 6

Authors: Diego Castañeda Garza

Co-authors: Sergio Silva Castañeda

Abstract: In this article we explore the precariousness of the Mexican state between the two most important foreign interventions that the country suffered in the 19th century. We argue that, although the Mexican state did not manage to consolidate itself until the last quarter of the 19th century, there were important conditions that changed between 1848 and 1862 that at least allowed for the occupation of the north of the country. The defeat of Mexico in 1848 and the subsequent loss of territory allowed for a manageable and less threatened border. At the same time, it encouraged a political agreement in the center of the country on the importance of controlling that border and occupying that territory. In this paper we use a panel model as well as a synthetic control analysis to show how these changes did produce a trend change in the demographics of the northern states (except Sonora), reflecting a greater capacity of the Mexican state to protect its territory and even exploit it economically. By 1862 these changes allowed the Mexican state to survive precisely in those territories that were its greatest weakness between 1846 and 1848.

A Wicked War: War and the Wealth Inequality – Public Debt Nexus.

Session: 7

Authors: Diego Castañeda Garza

Co-authors: NA

Abstract: As war is an eminently political event, the impact of wars on inequality can be seen as an expression of the politics in society. This paper engages with the ongoing literature relating warfare to wealth inequality dynamics in a pre-industrial world. It employs an unbalanced panel of wills in a combined event study and instrument variables research designs to explore the wealth inequality dynamics in Mexico during the Mexican-American War of 1846-1848. The findings suggest that weak public finances and financial crisis led to increasing wealth inequality through military expenditures and national debt. However, the formation of a regressive fiscal-military state and a levelling effect of warfare can coexist. Inequality depends on how war is financed and how destructive to capital and wealth the war is

Social Tables for Tanganyika, 1925-1957

Session: 7

Authors: Sascha Klocke

Co-authors: NA

Abstract: The study of historical income inequality in sub-Saharan Africa has received considerable attention over recent years, driven by the increasing recognition of the importance of economic inequality and colonial legacies for long-run economic development. Several studies have utilised the social tables approach to estimate inequality levels and trends in several different colonies (Aboagye & Bolt 2021; Bolt & Hillbom 2016; de Haas 2021; Tadei & Alfani 2019). This paper contributes to this literature with a case study on colonial Tanzania (Tanganyika). Tanzania today has one of the lowest levels of income inequality in sub-Saharan Africa, and its post-colonial history shows a level of political stability rarely seen on the continent. How this was achieved remains unclear. Despite being one of the most-studied countries in contemporary African studies, Tanzania’s colonial economic history has received comparatively little attention. To shed light on the levels and trends in income inequality on Tanganyika as well as their drivers, this paper estimates a series of Gini coefficients and inequality extraction ratios by creating social tables for five benchmark years between 1925 and 1948 as well as annual social tables for 1949 to 1957. The results show that overall, inequality as measured by the gini coefficient was relatively low throughout the colonial period and declining towards the end. The gini coefficients, however, do not adequately highlight pronounced racial inequalities that existed in both the wage sector as well as amongst agricultural producers. Racial inequalities were, however, declining throughout the colonial period as well, driven by the Africanisation of both the wage sector and agricultural export production. While this led to declining racial inequality, it also led to greater within-African inequality, driven by an increasing share of skilled labourers in the wage sector and increasing regional differentiation in African agricultural production. Looking at the gini coefficients in relation to the maximum attainable inequality – the inequality extraction ratio – confirms the impression of relatively high inequality throughout the colonial period, with a decline towards the end. The main drivers of inequality in colonial Tanzania, then, are identified as racial wage and employment discrimination and uneven agricultural development. Colonial policies played a significant role in both. In the wage sector, they established formal and informal colour bars and explicit wage discrimination, which suppressed African incomes and limited African income earning opportunities overall. This was exacerbated by a failed educational strategy which did not offer enough education to create a skilled labour force that could meet the demands of the Tanganyikan economy. In the agricultural sector, it was the colonial administration’s focus on promoting African cash crop production in already well-performing areas and the failure to improve market access in remote areas which led to an increasing regional gulf in incomes.