Module 7

Question 1

What is ‘economic growth’

Answer 1

Its defined as the growth rate of the ‘real per capita gdp’

Question 2

How to calculate the ‘real per capita gdp’?

Answer 2

Real per capita gdp = real gdp / population

Question 3

What is gdp also called?

Answer 3

Its also called the average real per capita income

Question 4

How to obtain the real per capita GDP?

Answer 4

1. We need to download the real GDP and the population series
2. population can be obtained by using keyword population and selecting the population series

[Double check if we need to know]

Question 5

What are quintiles?

Answer 5

Its when we divide the population into five equal groups based on the distribution of a given variable, and these groups are called quintiles.

Question 6

What does the low-high quintiles represent?

Answer 6

The lowest quintile represents 20% of the population with the smallest values and the fifth quintile includes 20% of the population with the highest values.

Question 7

How to construct quintiles?

Answer 7

1. Order the variable(of focus) from lowest to highest (the order is dependent on what is the focus group)
2. Split the group into equal groups
3. Take the average of each quintile
   (There might be three variables you order based on the variable that is the focus group)

Question 8

What is the median?

Answer 8

Seprates the population into two equal groups

Question 9

What is the purpose of the ‘gini coefficient’?

Answer 9

Its to provide one number that characterizes the level of inequality

Question 10

What is the lorenz curve?

Answer 10

Its a visualiation tool used to analyze incme inequality

Question 11

How to measure the ‘gini coefficant’?

Answer 11

Its a measure based on the lorenz curve:

1. Its the area between the perfect equality line and the lorenz curve divided by the area below the equality line

Question 12

How to calculate the gini coeffficant?

Answer 12

Gini =0.8- 0.4 * (h1+h2+h3+h4)

h1 = (base*h) /2
h2 = (h1+h2) /2

Question 13

When does income iequality become problematic?

Answer 13

It becomes problematic when it implies that a large proportion of the population is in a state of poverty

Question 14

How do we find broke bitches (poor)

Answer 14

• A household is consdiered poor if their income falls below the poverty line

Question 15

How do we measure poverty?

Answer 15

1. The market basket measure
2. Low income measure

Question 16

What is the market basket measure?

Answer 16

1. This is based on the cost of a ‘specific basket of goods and services that represent the :
   - the modest and basic standard of living (food, clothing ,s helter)
2. This measure determines whether a family falls below the poverty line

Question 17

What is the ‘low income measure’

Answer 17

1. This measure is equal to half the adjusted median household income.
2. This is a measure based on after-tax income

Question 18

How to find the average income in the decile?

Answer 18

10* (real per capita GDP) * (income share of decile i)

Question 19

What are a few sources of ‘inequality’?

Answer 19

1. Inequality in skills
2. Inequality in how skills are valued
3. Inequality in education
4. Tech advances
5. Value of education

Question 20

Explain the few sources of inequality?

Answer 20

1. Inequality in skills: If some workers have a particular skill that is highly in demand, these workers will be well paid compared to the average workers.
2. Inequality in how skills are valued: Depending on how the society values products and services, some skills may result in higher income than others. It also depends on the demand and supply of those skills: if a particular skill is in high demand and low supply, it will be more valued.

3.Inequality in education: We assume here that higher education leads to higher income. The following compares the median wage by level of education in 2016 (Statistics Canada, 2017).

4. tech advances
5. Value of education: Everything that affects the value of being educated will increase the impact of education inequality on income inequality.

Question 21

What are the possible channel which inequality may have effect on?

Answer 21

1. Investment
2. Education
3. Taxation
4. Political stability
5. Level of criminality

Question 22

What is economic mobility?

Answer 22

Economic mobility is defined as the ability for individuals to move from one part of the income distribution to another

(e.g. moving from the first quintile to the second of third quintile

Question 23

What are two factors that effect mobility?

Answer 23

1. The accessbility of education
   2.The accessibility of health care