4.2.2 Inequality Flashcards
Define income
Flow concept measured over a given period of time
Returns that households receive as a result of providing their factors of production
wages, rent, interest payments
Define wealth
Stock concept
Assets with market value that generate income
Pensions, shares
What is the link between income and wealth
Higher-income ⇢ used to buy assets ⇢ Assets used to generate income
Loop goes around
Both income and wealth are mutually influencing
What are the causes of income + wealth inequality within countries and between countries
- Age - wealth accumulates over time + income increase usually with age
- Education - more qualification leading to greater earning potential
- Ownership of financial assets + property - inflation of asset prices can lead to an increase in income
- Wage differentials - greater this is, greater inequality
Number 3 is worsened by inheritance
What are the measurements of income inequality
Lorenze curve - universal indicator
Gini Co-efficient - mathematical indicator
Describe the Lorenz curve shows income inequality
Cumulative % income on Y
Households by income on x
1 is total equality - 0 in total inequality
Describe how the Gini Co-efficient is formed from the Lorenz curve
The Gini coefficient here = area A / areas A + B
Countries with the highest income equality
South Africa
Namibia
Botswana
Countries with the lowest income inequality (2017)
Azerbaijan
Ukraine
Slovenia
What can the Gini-coefficient be used relative to the Government
Show the effectiveness of Government policies to redistribute income
Main causes of income inequality between countries
- Health - low life expectance
- Education - low school enrolment (gender opportunity gap)
- Technology - limited access to affordable technology - productivity
- Primary commodities - pushed to low prices by TNS
- Low real spending - loan sharks push families into dbet
What has globalisation done to the types of jobs available
More jobs in relatively unskilled work offering low rates of pay moved abroad
Fewer jobs in traditional full-time jobs in heavy industy
More jobs in high-knowledge occupations requiring expensive qualifications offering premium rates of pay
What does the Kuznets inequality curve infer
inequality often rises during a phase of rapid industrialisation + urbanisation
Becomes a point when increased welfare provision/progressive taxes/balanced income growth may lead to a fall in overall inequality
1 - industrialisation + urbanisation
2 - tertiary dominated economy + process tax/welfare systems
Features of capitalism
Private property, self interest, competition in markets, price mechanism, freedom of choice, limited rule for Government
One of the big features of capitalism is profit motive which can worsen inequalities
Why is this is not always the case
People may be motivated to run a business by social enterprise
Cooperate business owned by their memebrs
Gov can tax high profits
competitions policy + regulation of monopoly profits
