Brainscape's Knowledge GenomeTM

Browse over 1 million classes created by top students, professors, publishers, and experts.


See full index

EC2A3 > 4. Living Interdependently: public goods and externalities > Flashcards

4. Living Interdependently: public goods and externalities Flashcards

1
Q

Why is their government involvement in inequality?

A

Market cannot correct itself

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

What determines income distribution in the general equilibrium framework?

4 things

A

.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

Optimise the constrained demand function?

A

.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

What is the market clearing condition?

A

.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

Is there a mechanism to equalise income when prices are determined by supply and demand?

A
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

What is the sample size when Income inequality is measured?

A
  • Measured based on samples of indivduals in the population
  • Typically household income is observed
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

Complications of using income inequality as a measure of inequality

A
  • Difficult if you live in a household with multiple people (E.g. There may be a dependent person in the household)
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

What do we do to adjust for the inaccuracy that can result when measuring income inequality as a result of people living in multi-person households?

A
  • Equivalised income (Adjusting for household composition)
  • OECD modified equivalence scale since the 1990s: A value of 1 to the household head, 0.5 to each additional adult and 0.3 to each child (Adds weights)
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

What is the OECD eqivalence sclae

A
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

2018 UK equivalised household disposable income

A
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

The UK distribution of wages

A
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

What is missing from our simple model (where income is determined by labour supply and productivity)?

A

.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

Rewards and inequality
* What is it determined by?
* What does it differ across and why?

A
  • Determined by market equilibrium
  • Differ across time and space due to distribution of property rights, relative scarcity of different skills
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

International trade and inequality

A

Rising inequality is associated with rising prices that come around due to globalisation

  • Trade agreements = reduction in protectionism. Income can be affected by ways other than direct ways (Can affect prices in an open economy)
  • Lower prices of goods, that are import- competiting
  • Lowering of the wages of those who produce the lower priced goods
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

Thomas Piketty: Capital in the 21st century
* What does he argues causes inequality?

A

.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

Equivalised income example

A
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

Gini coefficent

A
  • Standard measure of inequality
  • Named after Itlian Statitician Corrado Gini
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
18
Q

Lorenz curve

A

Graphical representation of the distribution of income within a population
Named after American economist Max Otto Lorenz

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
19
Q

Equality line
The basics of the Lorenz curve

A
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
20
Q

What is the approximate Gini coefficent equation

A
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
21
Q

Higher and Lower inequality

A
22
Q

Share of income example

A
23
Q

Lorenz curve example
Draw the graph

A

.

24
Q

Gini coefficent across countries

A
25
Q

What are the big debates about inequality

A
26
Q

What are the two key views of the market system?

A
27
Q

The work of Robery Nozick

A
28
Q

Proxy for wellbeing, so is income the same as welfare?

A
29
Q

Why is income a good proxy for utility?

A

Income is cardinal and comparable (common metric) across individuals

30
Q

What happens when all income is spent?

A

Consumer is on the budget line

31
Q

Utility and income
Cobb-Douglas

A
32
Q
A
33
Q
A
34
Q

Diminishing marginal utility
Slide 42 and 43

A
35
Q

Measuring utility: Neuroscientific methods

A
36
Q

Measuring utility: Life satisfaction surveys

A
37
Q

What is Inequality aversion?
Piguo- Dalton Theory of transfers

A

.

38
Q

Class of social welfare functions
* Utilitarianism
* Preference for equality (Inequality aversion)
* Ralwsian

A
39
Q

Utilitarianism social welfare function

A
40
Q

Inequality aversion social welfare function
* Graph
* Is the sign positive or negative?

A

.

41
Q

Rawlsian (maximin) social welfare function

A
42
Q

Rationale for inequality aversion:

A
43
Q

What is prioritarianism?

A

Give more social weight to individuals who have less

44
Q

Why might inequality be a good thing?

A
45
Q

Gini coefficient equation (not approximation )

A
46
Q

Gini coefficent example

A
47
Q

Deprivation vs Inequality?
• Should we focus on the well-being of those with the lowest income?

A
48
Q

Relationship between life satisfaction and income

A
49
Q

(Starmans et al 2017)
How is a preference for fairness distinct from a preference for equality?

A
  • Actually prefer unequal societies.
  • Equal distribution is seen as a moral good
  • Norton and Ariely: Individuals are nto worried largely about inequality, but prefer it
  • When the equal outcome is the fair one, then then equality is desired. But if their is a disparity in productivity, then inequality should be the fair option as the more productivie person should be rewarded.
  • Meritocracy
  • Fairness solves the issue of free-riders, cheaters and bad actors.
50
Q

(Starmans et al 2017)
Should reducing inequality be a conscious objective of government?

A
  • Inequality leads to violence, teenage pregnancy, interpersonal distrust and higher divorce
  • Inequality reduces hapiness amonng bottom earners
  • Workers on the low end have low effort
51
Q

(Starmans et al 2017)
Can there be too much equality?

A
  • When it coincides with fairness, then equality should be desired. But if it is not fair, then equality is not desired
  • Individuals who are too cooperative run the risk of being taken advanatage of
  • This would penalise high productivity individuals
  • Inequality promotes people to work harder (meritocrativ mobility)
52
Q

(Kanbur et al, 2018)
What is ‘inequality of opportunity’? How does link to ‘circumstances’ and ‘effort’ as determinants of outcomes?

A
  • Inequality of oppurtunity: Fraction of the variation of income which is attributed to circumstance
  • Roemer: Cirumstance (Factors outside of your control like gender) and effot (Characteristics that individuals can control like education) determine income

EC2A3 (10 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2024 Bold Learning Solutions. Terms and Conditions