6 - economic inequality

Question 1

what does your income depend on and why?

Answer 1

on who your parents are because this will determine the country you are born in, ethnic group and first language
also influence amount and quality of your education, inherited wealth and social networks

Question 2

how can the trade offs that a society faces in addressing inequality be modelled?

Answer 2

using standard framwokf of feasible sets and indifference curves

Question 3

what can government policies do?

Answer 3

limit economic inequality without declining average living standards

Question 4

inequalities depend on people and what else?

Answer 4

circumstances

Question 5

what is an endowment policy?

Answer 5

funding, financing, donation of money,

Question 6

what are endowments?

Answer 6

facts about an individuals that may affect his or her income
basis of wealth

• physical wealth
• Cv is partial list of indidvudals endowments

Question 7

what are the basis of wealth?

Answer 7

edonowments

Question 8

what has social media allowed in terms of endowments?

Answer 8

employers can not only four CVs in terms of nationality etc but also research other endowments such as appearance and connections

Question 9

what is meant by people being in different classeS/

Answer 9

groups of people who because of their differing endowments engage in asymmetric economic interactions with members of other groups

such as owner and employers

Question 10

how can inequality occur within a class?

Answer 10

endowments

differ between nationality or distinct skills are paid different wages or are out of work

Question 11

why are the interactions between different classes known as asymmetrical?

Answer 11

actions open to one party, they are not identical
employer dictates wage and tasks
employee decides how to do this

e.g. if employer was to quit this wouldn’t make relationship symetrical as employer would just hire someone else

Question 12

what are assymetrical relationships based on?

Answer 12

different endowments that the members of different classes possess and are associated with differences in income and also power

Question 13

why are interactions between classes political?

Answer 13

involve exercising power by one party over the other

Question 14

how can those not wealthy enough to become employers first hand become employers?

Answer 14

through the credit market

unsuccessful borrowers or credit excluded may become employees

Question 15

what does the value of a particular endowment depend on?

Answer 15

technology and institutions

for example being strong was valuable to farming until machines made it less important to determining earnings

change in tech reduced value of endowment and value fell

Question 16

what are three ways in which wage workers receive decided, what does this how/

Answer 16

• decided by supply and demand for worker endowments
• set by law
• it might have been decide by bargaining power of a trade union

therefore institutions matter in terms of valuing endowments

Question 17

how can institutions change reservation options?

Answer 17

legislations regarding pay and hours

Question 18

what does the lorenz curve and mini coffeicnet show?

Answer 18

inequality between employers, employed and the unemployed

shaded area is inequality

Question 19

how might change in legislation in institutions increase inequality?

Answer 19

if the legislations change in regards to firing employees it may become less costly and easier

greater likelihood that a shirking worker would get fired means that employers can get employees to work for a lower wage, increasing inequality between employers and employees as the output (how much profit) does not change

Question 20

what is the employees primary endowment?

why does this mean that inequality might fall?

Answer 20

a capacity to work rather than physical wealth

increased schooling = greater productivity now produces a higher profit for firms, if higher profit firms enter this reduces nuemployment, total output has increased so more employed

Question 21

how can technology affect inequality between employer and employee?

Answer 21

labour saving technology, increase in unemployment, reservation option for workers has deteriorated, firms can now pay a lower wage,

however increase in tech can also lead to job creation

Question 22

what are two other classes side from employers and employees?

Answer 22

lender and borrower

Question 23

wat is an important source of economic inequality today?

Answer 23

differences in income between hose who lend and those who borrow

e.g. due to interest of loans

Question 24

what is unkind transfers?

Answer 24

public expenditure in form of free or subsidised services for households rather than in cash form

such as healthcare and education

Question 25

what is final income?

Answer 25

when you take into account indirect taxes and in kind transfers you arrive at final income
most complete value of living standards
value of all goods and services household able to consume

Question 26

what is the welfare state?

Answer 26

A set of government policies designed to provide improvements in the welfare of citizens by assisting with income smoothing (for example, unemployment benefits and pensions).

turn market income into final income

Question 27

in countries with large welfare states what is most income spent on?

Answer 27

social insurance

Question 28

what is social insurance?

Answer 28

which includes assistance to poor households, but also includes public pensions, unemployment benefits, social housing, child benefits, and other expenditures that are targeted at groups that are not defined by low income

Question 29

what is progressive and regressive redistribution?

Answer 29

p = expenditure or transfer policies that reduce inequality, increase income of poor more than rise

r = rise in inequality

Question 30

what is relative incomes?

Answer 30

ratio of income between houses

Question 31

when might a tax be regressive?

Answer 31

if poorer people are paying more in tax than rich

for example poor may pay 10% and rich 15% but poo may still be paying more in terms of their overall income compared to poor

Question 32

what is a non compete contract?

Answer 32

A non-compete agreement is a contract where an employee promises not to enter into competition of any kind with an employer after the employment period is over. These agreements also prohibit the employee from revealing proprietary information or secrets to any other parties during or after employmen