Poverty & Inequalities- MM Flashcards
What is 1) income & 2) wealth?
1) A flow- continuous movement in & out earned by supplying FOP
2) A stock- static. Can be inherited or built up over time
How are income & wealth distributed in every country?
Unevenly e.g. richest 5% own 50% of the country
How do countries try to achieve a fair distribution of income?
Progressive taxation systems (high earners pay a higher %)
What are the two types of poverty?
1) Absolute poverty
2) Relative poverty
What is absolute poverty?
When households have to survive on US $2 a day or less
What is relative poverty?
When households earn 60% (or less) of the median income
What is the 1) median income & 2) where is relative poverty in the UK?
1) £36,000
2) £20,000
What do people in absolute poverty struggle to have?
Basic needs
What do people in relative poverty struggle to have?
Anything other than basic needs
How is income inequality measured?
GINI co-efficient
What is another way of showing equality?
Lorenz curve
What does a Lorenz curve show and how?
45 degree line =full equality (50% of pop. has 50% of income)
Further to the right the ‘bow’ goes, the more unequal the country is
What is the 1) x-axis & 2) y-axis on a Lorenz curve?
1) % households by income distribution
2) Cumulative share of income %
What are 3 things the causes/consequences of poverty/inequality depends on?
1) Type of poverty
2) Size of inequalities
3) Economic position
Which type of poverty is inequality closely related to & why?
Relative poverty- high income inequality creates more households in relative poverty
What are 3 consequences of absolute poverty?
1) Social problems- crime, poor health etc
2) Country not producing too potential (PPF diagram) as poverty means less education
3) Brain-drain- brightest & fittest members of country emigrate
What are 4 causes of income inequality?
1) Labour market trends- flexible=greater income inequalities
2) Taxation policies- more progressive taxation= less inequality
proportional/regressive taxes= more inequality
3) Government intervention-strong welfare schemes=less inequality
4) Wealth inequalities- wealthier hosues can invest to ↑ income
What are 3 causes of wealth inequality?
1) Income inequality (duh can’t afford anything)
2) Gvnmt failure- corruption
3) Cultural factors- e.g. UK, land & poverty ownership in relatively few hands
What are 3 consequences of inequality/ relative poverty (closely linked)?
1) Social problems- crime, structural unemployment
2) Economic problems- low morale, less incentive to work= low productivity=
3) low economic growth
What are the 4 types of income?
1) Rent
2) Wages
3) Interest
4) Profit
What is the impact of economic growth on poverty and what does it depend on?
Reduce poverty- higher AD
May increase relative poverty-growth may disproportionally benefit highest earners
Depends on type of poverty & gvnmt actions etc
What is the impact of economic growth on inequality and what does it depend on?
Reduce inequality if higher AD creates jobs= higher income
May increase it depending on who benefits (shareholders)
Depends on taxation policies (progressive vs regressive) and economic position (Yfe= inflation)
What is the impact of economic development on poverty and what does it depend on?
Reduce poverty- higher GNI per capita- better education & healthcare etc
May not reduce- depends on inequality
Depends on government & what’s driving development & if it is sustainable
What is the impact of economic development on inequality & what does it depend on?
Reduce inequalities by lifting households out of extreme poverty= smaller gap
More opportunities (school & healthcare)
May not reduce as could go to elite only
Depend on taxation policies, what’s driving it & if it’s sustainable
