Lecture 12

Question 1

Rich/poor ratio

Answer 1

The average income of richest 10% divide by the average income of the poorest 10% in a country

Question 2

Income shares

Answer 2

Share of income received by the top 1% of earners in a country

Question 3

Gini Coefficient

Answer 3

0.5 x (Average difference in income/ average income)

Question 4

Measuring Inequality

Answer 4

1. Rich/poor ratio
2. Income shares
3. Gini coefficient

Question 5

Lorenz curve (visualising inequality)

Answer 5

Lorenz curve indicates how much disparity there is in a particular measure e.g. income across the population

Question 6

Intergenerational Inequality

Answer 6

Inequality can increase over time because the economic status of parents gets passed down to their children

Question 7

Technology

Answer 7

Process that uses inputs to produce outputs

Question 8

Institutions

Answer 8

The laws and informal rules that regulate social interactions (rules of the game)

Question 9

Endowment

Answer 9

Anything an individual posses that may affect their income e.g. physical assets, human capital

Question 10

Redistribution policies

Answer 10

Refers to taxes and government transfers of the government that result in a distribution of final income that differs from the distribution of market income

Question 11

Welfare state

Answer 11

Policies that turn market income into final income

Question 12

Progressive

Answer 12

Direct effect of a policy is to reduce inequality

Question 13

Regressive

Answer 13

Direct effect of a policy is to increase inequality

Question 14

Predistribution policies

Answer 14

Affect the endowments or the value of the endowments that people have

Question 15

Social mobility rate

Answer 15

Proportion of students at the university who were eligible for Free School Meals and are amongst the top 20% of earners at age 30