Theme 4: Inequality Flashcards
What are the two types of inequality?
Wealth and Income
What is wealth?
The stock of assets added up
What is an example of wealth inequality?
8 men in the world own same wealth as the poorer half of the world combined- Oxfam
What is perfect income equality?
Everyone receives the same amount.
What is an example of income inequality?
USA average CEO paid 271 times more than average production worker in 2017.
Draw a Lorenz curve illustrating perfect equality, income inequality and very unequal income inequality
What are the 5 factors influencing inequality?
- Minimum wage
- Assortative mating
- Social benefits and tax
- ‘R>G’ hypothesis
- Inheritance
How does minimum wage impact inequality?
Poor earn more. Rich earn less as their AC have increased with likely lowers their profits and therefore their bonuses decrease. So they earn less and the poor earn more.
What is assortative mating?
The rich and successful marry the rich and successful and have richer and more successful children as they have grown up in a more healthy environment encouraging successfulness.
How does social benefits and tax reduce inequality?
Progressive income tax results in lower income inequality.
What is the R>G hypothesis?
The rate of return on wealth is greater than the rate of growth of income.
What is the estimated R>G rate of return?
Between 1950 and 2012 R has estimated to grow by 5.3% and G has estimated to grow by 3.8%.
What is the Gini coefficient?
G= A/A+B
What does a gini coefficient show?
As gini coefficient increases income inequality increases. Always inbetween 0 and 1.
0- perfect income equality
1- total income inequality
How does inheritance influence inequality?
90% of all wealth is inherited. - Thomas Piketty
