Inequality- Global Inequality Dynamics

Question 1

Types of inequality (5)

Answer 1

Opportunity
Happiness and utility
Consumption
Income (capital or labour)
Wealth

Question 2

Inequality of opportunity

Answer 2

Ability of individuals to freely/fairly generate outcomes

I.e have a level playing field

Question 3

Inequality of consumption: individual welfare

Answer 3

Tracking expenditure on G&S

Question 4

Evaluation of inequality of consumption

Answer 4

Difficult to measure: does not account for use/access to public goods people consume

Question 5

Inequality of income

Answer 5

Ability of someone to meet material needs

Question 6

Pros and cons of inequality of income (1,3)

Answer 6

Pros: readily available and easy to collect

Cons:
Doesn’t capture lifetime variations of income e.g young (low income and asset poor) vs rich (low income asset rich)

Current income doesn’t display accumulated wealth (inheritance)

Usually only includes formal income (ignores returns from assets etc)

Question 7

Inequality between whom? 3 scales

(5 types, 3 scales)

Answer 7

Global inequality

Between country inequality

Within county inequality

Question 8

Global inequality

Answer 8

Inequality among all

Question 9

Limitation of global inequality (1)

Answer 9

Redistribution policies can only occur at the national level

Question 10

Between-country inequality, and what its based on

Answer 10

Considers individual countries as the population of interest

Based on mean income or wealth

Question 11

Limitation of measure of between-country inequality (1)

Answer 11

Mean income can hide huge deviations within country inequalities!

Question 12

Within-country inequality advantages (2)

Answer 12

Individuals compare levels of income with income around them

Redistribution policies implemented at the local level.

Question 13

Gini coefficient formula

Answer 13

2 x A (area between line of equality and Lorenz curve)

Question 14

Note: measures of inequality give a simplistic view

So evaluation of Gini coefficient

Answer 14

Only a single numerical index: can have different distributions but provide the same number.

Question 15

Evolution of income inequality:

Start with a century ago…

2.And what is the key determinant in the difference in trajectories of inequality across countries.

Answer 15

At a high a century ago, but dropped in the first half of 20th century. Surged back since 1980, stabilised since 2010.
2.
Different national trajectories of inequality highlight contrasting institutions and policy.

Question 16

US v EU differences examples and why they followed different trajectories (2)

2. Evolution of income inequality UK vs Nordic, why, and provide an example.

Answer 16

E.g US v EU, US is more unequal, were similar until different changes e.g less progressive taxation, falling min wage etc.

2.
UK share of national income going to top 1% increasing.
However Nordic countries have fallen.

Due to their institutions e.g Nordic countries have strong gender equality rights, creating equal opportunities for women thus reducing income inequality between genders.

Question 17

Income growth on inequality, and stats

Answer 17

Income growth is higher for high income groups. So rich are getting richer. (Inequality)

Top 0.1% captured as much growth as bottom 50% of world population

Question 18

Global income inequality today. Most unequal region

And one stat: how much do top 10% in ME account for in income?

Answer 18

Middle East

Top 10% in Middle East account for 61% national income

Question 19

Why is Middle East unequal? (2)

Answer 19

Modern origins:
Functioning of contemporary capitalism

Geography of oil ownership/ transformation of oil revenues into permanent financial endowments

Question 20

Why is Brazil/South Africa unequal? (3)

Answer 20

Not of modern origins, unlike Middle East.

Their inequality comes from legacy of slavery, colonial or racial heritage

Question 21

Capital income inequality vs labour income inequality

Answer 21

Capital income inequality is due to differences in wealth (k) (due to inheritances, rates of return etc)

Labour income inequality is due to differences in working ability, effort and luck

Question 22

Two ways of achieving extreme levels of inequality

Answer 22

Hyperpatrimonial society

Hypermeritocratic society

Question 23

Inequality of capital ownership: why did income inequality fall?

Answer 23

Destruction of human and physical capital due to world wars and Great Depression between 1914-1945

Since, policy regime after WW2 e.g progressive tax improved equality.

Question 24

Which has more concentrated distribution:
Capital or labour income?

And evidence to support this?

Answer 24

Distribution of capital is more concentrated (shared between less people)

Bottom half of population hardly owns wealth.
Wealth-to-income ratios rising.

Question 25

Modern view on origins of inequality

Answer 25

Inequalities are mainly based on individual talent and effort

Question 26

1. Capital ownership is becoming more concentrated once again , what evidence shows? (2)
2. What is EU and US status in terms of capital/labour income inequality?

Answer 26

Bottom half of population hardly owns any wealth.
Wealth-to-income ratios are rising.

US is land of booming top labour incomes (more income coming from salaries(i.e labour wages, rather than capital income or business income) in top 1% of income)
EU land of booming wealth (Wealth-to-income ratio)