This paper examines the suitability of increases in income equality as a criterion for assessing "commitment" and "progress" of countries, and hence, for allocating development assistance in accordance with the 1975 amendments to the Foreign Assistance Act of 1961. The principal conclusions are:
- Income distribution is a useful concept; the usual figures on income in the current month or year, although not ideal, provide a reasonable approximation to economic well-being.
- Reliable and timely data for measuring changes in income distribution are regularly available in only a handful of A.I.D.-recipient countries.
- Since the concern of the development community appears to be the alleviation of absolute economic misery, progress toward economic equality is best gauged by improvements in absolute economic position of those at the bottom of the economic hierarchy; this contrasts with the relative inequality measures used in most studies of poor countries up to now.
- Dramatically different assessments of countries' progress toward improving income distribution and alleviating poverty may be reached depending on whether we use measures of absolute poverty or of relative inequality; the actual experiences of Brazil and India show how great a difference the choice of measure makes.
- There is a very real danger in using any measurement of changing income distribution as an indicator of a country's commitment to alleviating poverty; no easily-calculable statistic can tell us what was possible, and therefore how well a country did relative to its potential, given its resource endowment and other factors conditioning its course of development.