The Determinants of Income and its Distribution in Four Villages in India

Abstract

The personal distribution of income is assumed to be a function of the values of factors of production and their distribution among households. In the paper's first part, simple linear regressions on variables representing land, labor, education, and milchstock account for 36% to 87% of the variance in household incomes per capita, for data from nine surveys. The influence of caste is found to be primarily indirect, through different caste groups possessing different amounts of resources. Closer inspection reveals that the role of economic factors varied greatly with occupation. In the paper's second part, an original method, based on correction for the systematic accumulation of errors, refines the estimated income distribution obtained from the set of regression equation predictions for individual households. Inequality of land distribution is shown to be the only important factor in explaining income inequalities. The income distribution effects of a hypothetical land reform are simulated.