Growth and Distribution in Guyana

Abstract

The paucity of data in much of the poor world prevents serious study on distribution and the latter is important since it affects the growth process and the performance of political institutions. This paper overcomes this obstacle by employing the Cambridge equation to derive profit and wage rates. The dynamics between these are used to estimate the changes in the functional distribution of income in Guyana from 1974-2013. This strategy uses the ‘low hanging fruit’ approach since data requirements are minimal. Growth in the mining sector ignites growth in the non-tradable services sector, which is characterized by low-wage employment. Consequently, a greater share of the gains in income in these sectors goes to profits when growth is sustained. The evidence implies that inequality is on the rise.

Keywords: Growth, Distribution, Guyana, Cambridge equation