Inequality- Global Inequality Dynamics Flashcards
Types of inequality (5)
Opportunity
Happiness and utility
Consumption
Income (capital or labour)
Wealth
Inequality of opportunity
Ability of individuals to freely/fairly generate outcomes
I.e have a level playing field
Inequality of consumption: individual welfare
Tracking expenditure on G&S
Evaluation of inequality of consumption
Difficult to measure: does not account for use/access to public goods people consume
Inequality of income
Ability of someone to meet material needs
Pros and cons of inequality of income (1,3)
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)
Inequality between whom? 3 scales
(5 types, 3 scales)
Global inequality
Between country inequality
Within county inequality
Global inequality
Inequality among all
Limitation of global inequality (1)
Redistribution policies can only occur at the national level
Between-country inequality, and what its based on
Considers individual countries as the population of interest
Based on mean income or wealth
Limitation of measure of between-country inequality (1)
Mean income can hide huge deviations within country inequalities!
Within-country inequality advantages (2)
Individuals compare levels of income with income around them
Redistribution policies implemented at the local level.
Gini coefficient formula
2 x A (area between line of equality and Lorenz curve)
Note: measures of inequality give a simplistic view
So evaluation of Gini coefficient
Only a single numerical index: can have different distributions but provide the same number.
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.
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.
US v EU differences examples and why they followed different trajectories (2)
- Evolution of income inequality UK vs Nordic, why, and provide an example.
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.
Income growth on inequality, and stats
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
Global income inequality today. Most unequal region
And one stat: how much do top 10% in ME account for in income?
Middle East
Top 10% in Middle East account for 61% national income
Why is Middle East unequal? (2)
Modern origins:
Functioning of contemporary capitalism
Geography of oil ownership/ transformation of oil revenues into permanent financial endowments
Why is Brazil/South Africa unequal? (3)
Not of modern origins, unlike Middle East.
Their inequality comes from legacy of slavery, colonial or racial heritage
Capital income inequality vs labour income inequality
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
Two ways of achieving extreme levels of inequality
Hyperpatrimonial society
Hypermeritocratic society
Inequality of capital ownership: why did income inequality fall?
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.
Which has more concentrated distribution:
Capital or labour income?
And evidence to support this?
Distribution of capital is more concentrated (shared between less people)
Bottom half of population hardly owns wealth.
Wealth-to-income ratios rising.
Modern view on origins of inequality
Inequalities are mainly based on individual talent and effort
- Capital ownership is becoming more concentrated once again , what evidence shows? (2)
- What is EU and US status in terms of capital/labour income inequality?
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)
