Econ II - Session 7

Question 1

What’s poverty?

Answer 1

Poverty is when your income is below some threshold.

Question 2

What’s inequality (of income)?

Answer 2

The wider the distribution of income across a society, the less equal is the society.

Question 3

What counts into multi-dimensional poverty?

Answer 3

Year of schooling
child school attendance
child mortality
nutrition
access and quality of basic consumption goods

Question 4

Is poverty growing globally?

Answer 4

No, since the 1970s, the number of poor people is declining. Since the 1980s, globally the non-poor outnumbered the poor.

Question 5

What’s the Lorenz curve?

Answer 5

Individuals ordered ascending by income
Similar to a cumulative distribution function
Equal distribution of incomes would give a straight line

Question 6

How to calculate the Gini coefficient from the Lorenz curve (formula)?
Gini index / coefficient
What‘s 0, what’s 1

Answer 6

G = a / (a+b)
a: space between equal Lorenz curve and actual Lorenz curve
b: space beneeth actual Lorenz curve

Equal income: G = 0
Total inequality: G = 1

Question 7

Different metrics used to measure inequality

Answer 7

• Standard deviation / mean
• Variance of log income

Question 8

Which practical considerations are there when it comes to measuring inequality?

Answer 8

• Pre-tax or post-tax? (depends on research question)
• Include transfers or not? (unemployment benefits, pensions)
• How to treat non-monetary transfers and provision of goods?

Question 9

Name a:
1) Poor country with a lot of inequality.
2) Poor country that’s pretty equal.
3) Rich country with a high income inequality.
4) Country with high and equal incomes.

Answer 9

1) Haiti
2) Ethopia
3) USA
4) Nordic countries

Question 10

Why has the income inequality increased since the 1970s in most OECD countries?

Answer 10

• Globalization (decreased trade barriers etc)
• Technology

Question 11

What caused the increase in the skill premium? (aka higher wages for highly skilled labor)

Answer 11

• Biased technological change
• Globalization

Question 12

How has inequality developed within countries and between world citizens since the 1970s?

Answer 12

Within countries: Increased
Between world citizens: decreased

Question 13

What is ‘social mobility’?
+ way of measuring

Answer 13

• Possibility / probability of individuals to “climb up the ladder”
• Way of measuring: Elasticity of income of a son with respect to the income of his father

Question 14

By what is social mobility improved?

Answer 14

• Less residential segregation
• Less income inequality
• Better primary schools
• Greater social capital
• Greater family stability