6 - economic inequality Flashcards
what does your income depend on and why?
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
how can the trade offs that a society faces in addressing inequality be modelled?
using standard framwokf of feasible sets and indifference curves
what can government policies do?
limit economic inequality without declining average living standards
inequalities depend on people and what else?
circumstances
what is an endowment policy?
funding, financing, donation of money,
what are endowments?
facts about an individuals that may affect his or her income
basis of wealth
- physical wealth
- Cv is partial list of indidvudals endowments
what are the basis of wealth?
edonowments
what has social media allowed in terms of endowments?
employers can not only four CVs in terms of nationality etc but also research other endowments such as appearance and connections
what is meant by people being in different classeS/
groups of people who because of their differing endowments engage in asymmetric economic interactions with members of other groups
such as owner and employers
how can inequality occur within a class?
endowments
differ between nationality or distinct skills are paid different wages or are out of work
why are the interactions between different classes known as asymmetrical?
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
what are assymetrical relationships based on?
different endowments that the members of different classes possess and are associated with differences in income and also power
why are interactions between classes political?
involve exercising power by one party over the other
how can those not wealthy enough to become employers first hand become employers?
through the credit market
unsuccessful borrowers or credit excluded may become employees
what does the value of a particular endowment depend on?
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
what are three ways in which wage workers receive decided, what does this how/
- 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
how can institutions change reservation options?
legislations regarding pay and hours
what does the lorenz curve and mini coffeicnet show?
inequality between employers, employed and the unemployed
shaded area is inequality
how might change in legislation in institutions increase inequality?
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
what is the employees primary endowment?
why does this mean that inequality might fall?
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
how can technology affect inequality between employer and employee?
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
what are two other classes side from employers and employees?
lender and borrower
wat is an important source of economic inequality today?
differences in income between hose who lend and those who borrow
e.g. due to interest of loans
what is unkind transfers?
public expenditure in form of free or subsidised services for households rather than in cash form
such as healthcare and education
