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ib economics hl > economics of inequality & poverty > Flashcards

economics of inequality & poverty Flashcards

1
Q

equality

A

everyone gets the same

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2
Q

equity

A

fairness through proportionable allocation based on individuals needs and circumstances

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3
Q

income

A

money you earn over a period of time (wages, interest, rent etc.)

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4
Q

wealth

A

value of everything you own (house, car, investments) minus what you owe (debt)

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5
Q

wealth inequality > income inequality

A

gap between rich and poor is wider when it comes to wealth as compared to income, wealth can generate income, so rising wealth inequality can lead to greater income inequality

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6
Q

Lorenz curve

A

population is divided into 2 quintiles, richest quintile is top 20% of households that have highest disposable income
poorest quintile lowest 20% of households that have lowest disposable income

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7
Q

gini coefficient

A

measures degree of income inequality in a population

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8
Q

gini coefficient (from Lorenz curve)

A

(area between line of perfect equality and Lorenz curve) / (area below Lorenz curve)

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9
Q

poverty

A

inability to cover minimal consumption needs or minimum standard of living

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10
Q

two main types of poverty

A

absolute poverty & relative poverty

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11
Q

absolute poverty

A

household does not have enough income to meet basic needs essential for survival like food, shelter and clothing

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12
Q

two ways of measuring country-wide (absolute) poverty

A
  1. determine % of people whose daily income falls below specific baseline amounts. these baselines remain the same for every country
  2. most widely used baseline amount is USD$1.90 per day 2011 PPP
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13
Q

relative poverty

A

when household’s income is below the median income for the society. so even if they can afford basic needs, they are still considered poor because they are much worse off than most people in the country (usually relative poverty line is 50% of country’s median income)

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14
Q

other dimensions of poverty

A

access to basic necessities, access to education and opportunities, security from violence, voice and agency

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15
Q

access to basic necessities

A

eg. clean water, healthcare & sanitation

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16
Q

access to education & opportunities

A

people who are poor may not have the same opportunities for education & employment as those who are not poor

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17
Q

security from violence

A

people who are poor are more likely to be victims of violence

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18
Q

voice and agency

A

people who are poor may not have the same voice or influence in their communities as compared to those who are not poor

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19
Q

limitations of income based measures of measuring poverty

A

poverty is multidimensional, encompassing more than just income

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20
Q

multidimensional poverty index (MPI)

A

captures deprivation in health, education and living standards. individuals deprived in at least 3 of 10 MPI indicators are considered MPI poor

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21
Q

challenges in accurately measuring poverty

A

defining poverty, data limitations, poverty lines

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22
Q

challenges due to defining poverty

A

disagreements about what constitutes poverty make it difficult to measure more consistently

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23
Q

challenges due to data limitations

A

survey frequency: irregular or infrequent household surveys lead to outdated data
incomplete data: surveys often miss vulnerable groups like the homeless or sex workers
data disaggregation: lack of data disaggregated by factors like gender, disability and age hinders understanding diverse impacts of poverty

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24
Q

challenges due to poverty lines

A

underestimation: lines fail to capture the real severity and intensity of poverty (for ignoring the other dimensions of poverty)
oversimplification: lines create an inaccurate picture of the unpredictable and sporadic nature of poor people’s income

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25
Q

consequences due to challenges in measuring poverty

A

misleading understanding of the extent & nature of poverty, ineffective policy interventions due to flawed poverty data, exclusion of vulnerable groups from poverty statistics and support

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26
Q

inequality of opportunity

A

people in the same society have unequal access to resources and opportunities based on factors like parental background, gender & birthplace

27
Q

impact of inequality of opportunity on income inequality

A

strong correlation
circumstances at birth (wealth, location, etc.) influence education, job prospects and income & wealth

28
Q

relationship between income inequality & inequality of opportunity

A

no countries with high opportunity inequality have low income inequality
few cases with low opportunity inequality and high income inequality suggest other factors at play

29
Q

unequal ownership of resources fuels income inequality

A

income depends on what factors of production (land, labour and capital) households own
each factor receives a share of national income rent, wages, interest, profits
highly unequal ownership leads to highly unequal income distribution

30
Q

recent trend of unequal ownership

A

share of income going to capital and entrepreneurship (interests, profits etc.) is rising
share of income going to labour (wages) is falling

31
Q

impact of unequal ownership (& recent trends)

A

decline in labour’s shares fuels income inequality

32
Q

causes of economic inequality & poverty

A

different levels of human capital, discrimination, unequal status and power, government tax & benefits policies

33
Q

different levels of human capital (causes of economic inequality & poverty)

A

skilled and educated workers earn more, while low-skilled workers face low wages and poor work conditions
the decline of mid-level skills and rise of high and low-skilled jobs further widens the gap

34
Q

discrimination (causes of economic inequality & poverty)

A

gender, race, religion, etc, can lead to job discrimination and lower wages of marginalised groups
(eg. women face higher poverty risks due to lower employment rates, lower pensions, and unequal pay for equal work)

35
Q

unequal status and power (causes of economic inequality & poverty)

A

concentrated market power in few firms allows them to charge higher prices and pay lower wages, increasing inequality
powerful social groups with exclusive privileges also contribute to wealth and income disparities

36
Q

government tax and benefits policies (causes of economic inequality & poverty)

A

taxes on high earners and benefits for low earners can narrow income gaps
however recent trends (contributing to rising income inequality)
1. lower top tax rates and reduced property/inheritance taxes for high earners
2. shrinking welfare state with reduced transfer payments

37
Q

globalisation and technological change (causes of economic inequality & poverty)

A

technology creates both new jobs and skills while devaluing others. widens gap between those with “in-demand” skills and those without
increased trade through globalisation can benefit workers in export-oriented industries but put those in import-competing fields at risk, potentially increasing income disparity

38
Q

market based supply-side policies

A

product & service deregulation, employment market flexibility, tax cuts

39
Q

product & service deregulation (market-based SS policies)

A

reducing government control over businesses and industries

40
Q

employment market flexibility (market-based SS policies)

A

weakening labor unions, lowering minimum wages & easing hiring and firing processes

41
Q

tax cuts (market-based SS policies)

A

stimulating economic activity by reducing tax burden on businesses and individuals

42
Q

pros of market based SS policies

A

potentially higher economic growth, job creation, lower prices

43
Q

potentially higher economic growth (pros of market based SS policies)

A

freer markets lead to increased innovation, efficiency and productivity

44
Q

job creation (pros of market based SS policies)

A

reduced regulations and lower taxes incentivise businesses to expand and hire more workers

45
Q

lower prices (pros of market based SS policies)

A

increased competition can drive down prices for consumers

46
Q

cons of market based SS policies

A

widening inequality, reduced worker protections, increased monopoly power

47
Q

widening inequality (cons of market based SS policies)

A

deregulation and tax cuts can disproportionately benefit wealthy individuals and corporations, exacerbating income disparity

48
Q

reduced worker protections (cons of market based SS policies)

A

weakening labour unions and employment laws make workers vulnerable to exploitation and lower wages

49
Q

increased monopoly power (cons of market based SS policies)

A

deregulation can lead to the formation of monopolies and oligopolies, which can harm consumers through higher prices and reduced choice

50
Q

potential approaches to balance stimulating economic growth and ensuring fairness & social well-being

A

progressive taxation, investing in education and training, strengthening anti-trust regulations, implementing safety nets

51
Q

progressive taxation (to create balance)

A

taxing wealthier individuals and corporations at higher rates to generate revenue for social programs and infrastructure investment

52
Q

investing in education & training (to create balance)

A

equipping workers with the skills needed to thrive in a changing economy

53
Q

strengthening anti-trust regulations (to create balance)

A

preventing the formation of monopolies and ensuring fair competition

54
Q

implementing safety nets (to create balance)

A

providing unemployment benefits, healthcare and other forms of assistance to those who fall behind

55
Q

impact of wealth & income inequality on economic growth

A

lower investment in human capital, lower savings, rent-seeking behaviour, credit constraints, political and social instability

56
Q

lower investment in human capital (impact of inequality on economic growth)

A

when lower-income households have less access to healthcare and education, they are less likely to invest in their children’s human capital, leading to a less skilled workforce and lower labour productivity

57
Q

lower savings (impact of inequality on economic growth)

A

lower income households have a lower propensity to save than higher income households, leading to lower overall rate of savings in the economy, reducing investment and economic growth

58
Q

rent-seeking behaviour (impact of inequality on economic growth)

A

when there is a high degree of inequality, wealthy individuals and businesses may be more likely to engage in rent-seeking behaviour, such as lobbying for government policies that benefit them at the expense of others, diverting resources from productive activities and reducing economic growth

59
Q

credit constraints (impact of inequality on economic growth)

A

lower income households may have difficulty accessing credit, which can limit their ability to invest in education or start businesses. this can limit their economic opportunities and reduce their contribution to economic growth.

60
Q

political and social instability (impact of inequality on economic growth)

A

high levels of inequality can lead to political and social instability, which can deter investment and reduce economic growth

61
Q

policy measures to reduce inequality & promote economic growth

A

investing in education & training, progressive taxation, strengthening labour unions, expanding access to healthcare and affordable housing

62
Q

investing in education & training (policy measures to reduce inequality & promote Econ growth)

A

helps to improve skills of workforce & make it more comeptitive

63
Q

progressive taxation (policy measures to reduce inequality & promote Econ growth)

A

help to reduce gap between rich and poor & generate revenue for government programs that can benefit all members of society

64
Q

strengthening labour unions (policy measures to reduce inequality & promote Econ growth)

A

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