Lec 32: Globalization and Inequality Flashcards
Define income inequality. What are maximum and minimum inequality?
the measure of disparity between the percentage of population and the percentage of income received by that population
maximum: one person holds 100% of the income
minimum: every person holds the same percentage of income
1) Why does inequality matter at the national and global levels?
National:
- Negative effects on economic growth, political stability, health and social outcomes
- People are inequality-averse
Global:
- Greater differences in incomes across countries
- Migration
2) Differentiate international inequality and global inequality
- International: inequality between mean incomes of nations
- Global: inequality between individuals in the world (imagine world is one country)
3) What do Milanovic’s concepts explore? What are the 3 concepts?
3 concepts explore international vs global patterns of inequality
- Unweighted international inequality
- Weighted international inequality
- Global inequality
4) Describe concept 1: unweighted international inequality
- Looks at average inequality levels between countries, and without weighing each country
- Measures unweighted international inequality
- Welfare concept: GDI/capita
- Unit of observation: country, w/o accounting for each country’s population
- Data: national accounts
- Currency conversion: PPP
- Ignores within-country inequality
5) Describe concept 2: weighted international inequality
- Looks at average inequality levels between countries, but weighs each country by population
- Welfare concept: GDI/capita
- Unit of observation: country, but takes into account each country’s population
- Data: national accounts
- Currency conversion: PPP
- Still ignores within-country inequality
6) Describe concept 3: global inequality
- Welfare concept: disposable income
- Unit of observation: the individual
- Data: household surveys
- Currency conversion: PPP
- Accounts for within-country inequality
7) What are 2 common measures of inequality? What are the bounds of each? Which part of the distribution is each more sensitive to?
The gini coefficient
- 0 = everyone has same income = equal
- 1 = 1 person has all of the income = unequal
- More sensitive to middle of distribution
Theil index
- 0 = perfect equality
- The larger the more unequal
- More sensitive to tails of distribution
8) What are the historical patterns of concept 1 inequality?
- Inequality between unweighted countries grew after WW2, declined during Fordism, and slightly grew during post-fordism
9) What are the historical patterns of concept 2 inequality?
- Inequality between weighted countries steadily increased until 1950s
- Plateau/decline in inequality during post-fordism
10) What is the inequality transition?
- Need to experience an increase in inequality before it can taper off
11) What does the elephant curve depict?
- How different parts of society experience different amounts of income growth?
- The very poor are locked out of growth, emerging economies experience income growth, the middle class experience a decrease in income growth, and the global elite experience a boom in income growth
12) What are some worrying facts about global inequality?
- Concept 3 inequality is vert high
- Top 5% of world pop controls 33% of world income
- Within-country inequality is also growing
13) Where is within-country inequality the highest? Which OECD countries have lowest and highest inequality?
- South America, South Africa, and China
- Highest OECD: Mexico
- Lowest OECD: Denmark
14) What can be done to reduce inequality globally?
- Change international trading system
- Remove agricultural subsidies + allow for free trade in key sectors
- Change recent WTO rules: put less emphasis on intellectual rights and financial liberalization
- Move from loans to grants
- Have a special program for Africa
- Global taxes and transfers
