Inequality

Question 1

Why does inequality matter?

Answer 1

It influences the perceived status of an individual and their happiness

Question 2

Define commutative justice?

Answer 2

Each person should receive income proportional to their contribution of labour and capital

Question 3

Define distributive justice?

Answer 3

Each person should receive income according to their need

Question 4

3 factors inequality has an effect on?

Answer 4

Social capital, trust and crime rates

Question 5

Why is inequality and socio political instability positively associated? (2)

Answer 5

Perception of lack of social justice
Unrest often erupts when a wealthy middle class is weakened

Question 6

How is inequality usually correlated with economic growth?

Answer 6

Irrelevant or negatively

Question 7

Why is extreme inequality associated with financial crises?

Answer 7

Increased borrowing when extreme inequality

Question 8

3 reasons too much equality is bad?

Answer 8

Too equal -> poor economic efficiency
Inequality produces economic incentives
Inequality can arise due to choice (eg. Leisure vs work, attitudes towards risk)

Question 9

When is it not possible to distinguish between the inequality of two countries when looking at their Lorenz curves?

Answer 9

When the 2 lines cross

Question 10

3 statistical measures for personal income distribution?

Answer 10

Range
IQR
Ratio of top to bottom deciles (or other percentages)

Question 11

One index and one graphical measure of personal income distribution?

Answer 11

Index: Gini coefficient
Graphical: Lorenz curve

Question 12

2 data sources required for personal income dist.?

Answer 12

Income tax data

Family expenditure surveys

Question 13

2 data manipulations that can be done for personal income dist.?

Answer 13

Controlling for family size

Adjusting for ages in families

Question 14

2 advantages of income tax data?

Answer 14

Highly accurate data on individuals income
From HRMC (official record)

Question 15

2 disadvantages of income tax data?

Answer 15

Tax units without demographic characteristics

Doesn’t include informal work/the unemployed tf incomplete data at bottom end of distribution

Question 16

Advantage of family expenditure survey?

Answer 16

Includes demographic characteristics

Question 17

2 disadvantages of family expenditure survey?

Answer 17

Poor data at top end (non response)

Can be inaccurate due to collection methods (since its a survey)

Question 18

How can you calculate the Gini coefficient?

Answer 18

Divide area under LC into trapezia
Calculate each area, sum to get A

Gini = (0.5-A)/0.5

Question 19

2 advantages of the Gini coefficient?

Answer 19

Easy to calculate

Uses entire income distribution

Question 20

3 disadvantages of Gini coefficient?

Answer 20

Can’t sum it across groups/countries
Divergences from equality are equally weighted
Can have different LCs but the same Gini coefficient

Question 21

Reasons for increase in UK inequality? (6)

Answer 21

Change in industrial structure
Returns to education
Skill biased technological change
Regional divergences
Demographic changes
Gov policy

DRS can’t rate grime

Question 22

What does the factor/functional income distribution try to explain?

Answer 22

The share of NI that each of the FofP receive

Question 23

How much of total income does labour income account for?

Answer 23

60%

Question 24

Learn diagram and different areas

Answer 24

Wage rate against employment

Question 25

What does global income distribution attempt to show?

Answer 25

One measure that represents global income dist.

Question 26

2 dimensions of GID?

Answer 26

Between country inequality

Within country inequality

Question 27

3 approaches to GID?

Answer 27

True global inequality (amongst all people)
Unweighted int. Inequality (between averages of each country)
Weighted int. Inequality (taking into account each country’s population)

Question 28

World Gini coefficient?

Answer 28

Roughly 0.7

Question 29

What does the distribution of earnings between different types of labour measure?

Answer 29

Differences between: job types, gender, age etc