Inequality Flashcards
what is income
the flow of money going to FoP over time
what is wealth
stock concept - accumulation of assets & savings
what does kuznets inequality curve show
inverted u shaped curve that sows the relationship between GNI per capita and the gini coefficient
- inequality rises during a phase of rapid industrialisation & urbanisation
- increased welfare provision, progressive taxes lead to a fall in inequality
what is the gini coefficent
condenses the entire income distribution for a country into a number between 0 and 1
- 0 = everyone has the same income
- 1 = single individual receives all the income
what are some other measures of income inequality
- quintice ratio
- ratio of average income of the richest 20% vs the poorest 20% - palma ratio
- ratio of the richest 10% of the populations share of GNI / the poorest 40% share
what is the lorenz curve
a graph on which the cumulative percentage of total national income (or some other variable) is plotted against the cumulative percentage of the corresponding population (ranked in increasing size of share). the extent to which the curve sags below a straight diagonal line indicates the degree of inequality of distribution.
methods of redistribution of income & wealth
- taxation
- benefits & public services
what is absolute poverty
exists when a person’s continued daily existence is threatened because they have insufficient resources to meet their basic needs
world bank = < $1.90 (PPP)
what is relative poverty
this is measured in comparison with other people in the country and will vary between countries. people are considered to be in relative poverty if they are living below a certain income threshold in a particular country
formula for gini coefficent
A/ A + B
what are the 5 different types of tax
- direct
- indirect
- progressive
- proportionate
- regressive
what is progressive tax
as Y increases the proportion/percentage of tax paid increases
what is regressive tax
as Y increases the proportion/percentage of tax paid decreases
what is proportionate tax
stays the same % independent of a change in Y
3 types of benefits
- targeted - D.L.A, A.A
- means-tested - qualification by low-income
- universal - child benefits
examples of ‘benefits in kind’
- NHS
- education
what are the 5 stages of redistribution
- original income
- cash benefits (pension, unemployment) - gross income
- direct taxes - disposable benefits
- indirect taxes - post-tax benefits
- benefits in kind - final income
what are the main causes of absolute poverty
- population growing faster than GDP in low income countries
- severe savings gap
- absence of basic government/ public services
- effects of endemic corruption in government and business
- high levels of debt and high interest rates
- damaging effects of civil wars and natural disasters
- low employment rates, vulnerable jobs and poverty wages
- absence of basic property rights
what areas do policies focus on to reduce extreme poverty
- poor health and nutrition
- lack of education
- depleted environment
- corruption and conflict
- poor government
consequences of extreme poverty for development
- low life expectancy and fewer years of healthy life expectancy
- low school enrolment rates as families cannot afford eduction - widens the gender opportunity gap
- low access to basic health care
- vulnerability to loan sharks for families mired in debt
- limited access to technology
- threats to democracy and stable institutions
- low real spending power limits the size of domestic markets for consumer goods and services
consequences of high relative poverty for growth
- causes a self-perpetuating poverty cycle
- volatile savings, high debts + low savings - misallocation of scarce resources
- social and political unrest/ tensions
