Unit V: Trade and Poverty: Real wages, inequality and globalization in Latin America before 1940 (Williamson)

Question 1

What does the chapter explore regarding the pre-1913 world trade boom?

Answer 1

The chapter explores the effect of the pre-1913 world trade boom on income inequality in the poor periphery.

Question 2

Why are globalization-induced distribution effects important according to the chapter?

Answer 2

They are important for social fairness and their potential impact on long-run growth.

Question 3

What concept is used to examine pre-industrial inequality?

Answer 3

The concept of the inequality possibility frontier (IPF) is used.

Question 4

What does the Kuznets hypothesis suggest about income and inequality?

Answer 4

It suggests an inverted U-shaped relationship between income and inequality.

Question 5

What was a significant characteristic of colonies regarding income inequality?

Answer 5

Colonies tended to have higher inequality and experienced income extraction through ‘colonial drains’.

Question 6

What was the main argument regarding globalization during the 19th century?

Answer 6

It led to a rise in inequality in much of the poor periphery.

Question 7

What drove the increase in inequality during the 19th century?

Answer 7

Changes in the wage-rental ratio due to specialization in primary product exports.

Question 8

What happened to the wage-rental ratio in resource-abundant regions?

Answer 8

The wage-rental ratio fell, increasing inequality.

Question 9

What occurred in resource-scarce East Asia regarding the wage-rental ratio?

Answer 9

The wage-rental ratio rose, leading to a decrease in inequality.

Question 10

What was the effect of globalization on long-run growth in resource-exporting regions?

Answer 10

It likely hindered long-run growth due to rent-seeking behaviour of the elite.

Question 11

What do social tables estimate?

Answer 11

Social tables estimate pre-industrial inequality by ranking social classes and their average incomes.

Question 12

What is the inequality extraction ratio?

Answer 12

It is the ratio of the actual Gini coefficient to the maximum feasible inequality.

Question 13

How does the regression analysis correlate colonial status with Gini coefficients?

Answer 13

Being a colony raised the Gini coefficient by about 12-13 percentage points.

Question 14

What impact did the 19th-century trade boom have on land-scarce regions like East Asia?

Answer 14

The wage-rental ratio generally increased, benefiting labour due to rising prices of labour-intensive exports.

Question 15

What trend was observed in resource-abundant regions like Punjab during the trade boom?

Answer 15

The wage-rental ratio fell due to rising rents and falling wages.

Question 16

What does ‘colonial drain’ refer to?

Answer 16

The transfer of income or surplus from a colony to the colonizing European country.

Question 17

What historical evidence supports the Engerman-Sokoloff thesis?

Answer 17

Higher extraction rates in pre-industrial Latin America compared to Western Europe support the thesis.

Question 18

What was the average Gini coefficient for pre-industrial Latin America?

Answer 18

The average Gini was 45.9.

Question 19

How did the globalization-induced rise in inequality affect economic growth?

Answer 19

It likely retarded growth by fostering rent-seeking behaviour instead of supporting institutions favouring property rights.

Question 20

Fill in the blank: The Kuznets hypothesis suggests an _______ relationship between income and inequality.

Answer 20

inverted U-shaped

Question 21

True or False: The wage-rental ratio rose in resource-abundant regions during the 19th century.

Answer 21

False

Question 22

What regions experienced falling wage-rental ratios during the 19th-century trade boom?

Answer 22

Regions such as the Punjab, Southern Cone, Egypt, and Southeast Asia.

Question 23

What is a significant argument against the idea that increased inequality spurred long-run economic growth?

Answer 23

Inequality may hinder the development of institutions that favour economic growth.

Question 24

What does ‘colonial drain’ refer to?

Answer 24

The transfer of income or surplus from a colony to the European country that was colonising it.

Question 25

What percentage of income was transferred from Nueva España due to colonial drain?

Answer 25

Up to 7.8%.

Question 26

What was the average percentage of income transferred from the Dutch East Indies?

Answer 26

7.5%.

Question 27

What was the initial percentage of income transferred from British India due to colonial drain?

Answer 27

5.8%.

Question 28

What is one argument for income inequality's role in economic growth according to classical economists?

Answer 28

Inequality concentrated surplus in the hands of the rich, who would invest it, driving growth.

Question 29

What is an argument against the idea that inequality fosters economic growth?

Answer 29

In the 19th-century periphery, inequality stemmed from high land rents, fostering rent-seeking by elites.

Question 30

What does the term 'periphery' refer to in the context of this text?

Answer 30

The poorer, primary-product exporting economies, often colonised.

Question 31

Define 'Terms of Trade'.

Answer 31

The ratio of a country's export prices to its import prices.

Question 32

What is 'De-industrialization'?

Answer 32

The decline in manufacturing activity in an economy.

Question 33

What do 'social tables' estimate?

Answer 33

The distribution of income across different social classes in a given society.

Question 34

What does the Gini Coefficient measure?

Answer 34

Income inequality, ranging from 0 (perfect equality) to 1 (perfect inequality).

Question 35

What is the 'Inequality Possibility Frontier' (IPF)?

Answer 35

A theoretical curve representing the maximum possible level of income inequality in a society at a given level of average income.

Question 36

What does the 'Extraction Ratio' indicate?

Answer 36

The ratio of the actual Gini coefficient to the maximum feasible Gini, indicating the proportion of potential inequality that is realised.

Question 37

What is the 'Kuznets Hypothesis'?

Answer 37

The theory that income inequality tends to follow an inverted U-shaped curve during economic development.

Question 38

Fill in the blank: The _______ is the ratio of wages to rents, often used as an indicator of income distribution.

Answer 38

Wage-Rental Ratio (w/r)

Question 39

What is the 'Heckscher-Ohlin-Samuelson (HOS) Model'?

Answer 39

A trade theory predicting countries will export goods that use their relatively abundant factors of production intensively.

Question 40

What is the 'Magnification Effect'?

Answer 40

The phenomenon where a change in relative product prices leads to a proportionally larger change in the relative returns to factors of production.

Question 41

True or False: Colonialism contributed to higher measured inequality within colonies.

Answer 41

True.

Question 42

How did colonial powers impact income within colonised regions?

Answer 42

By extracting a significant portion of the colony's economic surplus through mechanisms known as 'colonial drain.'

Question 43

What was the effect of colonialism on the Gini coefficient in colonies?

Answer 43

Being a colony was associated with a substantially higher Gini coefficient.

Question 44

What impact did the 19th-century trade boom have on resource-abundant poorer countries?

Answer 44

Increased income inequality due to rising land rents and falling real wages.

Question 45

What was the effect of the global trade boom on resource-scarce, labour-abundant countries?

Answer 45

Potentially drove up wages relative to land rents, decreasing income inequality.

Question 46

What evidence supports changes in the wage-rental ratio in the 'Third World' during the trade boom?

Answer 46

Diverging trends in wages and land rents across different regions.

Question 47

How did rent-seeking behavior affect the long-term economic growth in the 19th-century poor periphery?

Answer 47

It likely fostered institutions that favored the wealthy at the expense of broader property rights.

Question 48

What lesson does the historical experience of inequality in the developing world offer for today?

Answer 48

The distributional consequences of globalisation are influenced by a country's factor endowments and integration into the global economy.