Upload
tutor2u
View
8.915
Download
4
Tags:
Embed Size (px)
DESCRIPTION
This is an updated revision presentation covering aspects of inequality and economic growth/development - it is designed for Year 13 A2 macro students
Citation preview
Inequality, Economic Growth and Development
Kuznets and Income Inequality
Real Income Growth in the USA
Top Decile Income Share in USA
A Global Perspective
The vertical axis shows changes in real income between 1988 and 2008, measured in 2005 international dollars, i.e. adjusted for inflation and how the cost of things varies in different countries
The horizontal axis divides the incomes of the world into percentiles
A Global Perspective
The vertical axis shows changes in real income between 1988 and 2008, measured in 2005 international dollars, i.e. adjusted for inflation and how the cost of things varies in different countries
The horizontal axis divides the incomes of the world into percentiles
60m or so people who constitute the world’s top 1 per cent
A Global Perspective
The vertical axis shows changes in real income between 1988 and 2008, measured in 2005 international dollars, i.e. adjusted for inflation and how the cost of things varies in different countries
The horizontal axis divides the incomes of the world into percentiles
60m or so people who constitute the world’s top 1 per cent
New global middle class, particularly in China and India. In 2008 earning median income would put the average Chinese in the top half of the global income distribution
A Global PerspectiveWe now live in a world with a bulge around the median with significantly rising incomes for the entire second third (or more) of the global income distribution. That is the new aspiring global middle class.
We also see growing wealth and probably power of those at the very top and, remarkably, stagnant incomes for both the people just below the “enchanted” richest 1 or 5 per cent, and those poorest in the world.
Source: Milosevic, World Bank, 2013
Professor Angus Deaton
Inequality is a knotty subject. There is little agreement on what ought to be equal. Should it be a measurable outcome such as income or wealth; a hazier outcome such as power or freedom; or a vague aspiration such as “equality of opportunity”?
It is often said that the world is becoming more unequal. But it is less than clear what is meant by that. Income inequality between countries has grown over the past three centuries but it may now be narrowing between the world’s people as a whole. (FT 11-10-13)
Tax system is now less
progressive
Monopoly rent seeking –
power elites
Regressive effects of high
inflation
Widening urban-rural
income divide
Patchy nature of state welfare
systems
Systemic market failures e.g. education /
housing
Cognitive elites and rising premium incomes Root Causes Of
Tax system is now less
progressive
Monopoly rent seeking –
power elites
Regressive effects of high
inflation
Widening urban-rural
income divide
Patchy nature of state welfare
systems
Systemic market failures e.g. education /
housing
Cognitive elites and rising premium incomes Root Causes Of
Tax system is now less
progressive
Monopoly rent seeking –
power elites
Regressive effects of high
inflation
Widening urban-rural
income divide
Patchy nature of state welfare
systems
Systemic market failures e.g. education /
housing
Cognitive elites and rising premium incomes Root Causes Of
Tax system is now less
progressive
Monopoly rent seeking –
power elites
Regressive effects of high
inflation
Widening urban-rural
income divide
Patchy nature of state welfare
systems
Systemic market failures e.g. education /
housing
Cognitive elites and rising premium incomes Root Causes Of
Tax system is now less
progressive
Monopoly rent seeking –
power elites
Regressive effects of high
inflation
Widening urban-rural
income divide
Patchy nature of state welfare
systems
Systemic market failures e.g. education /
housing
Cognitive elites and rising premium incomes Root Causes Of
Tax system is now less
progressive
Monopoly rent seeking –
power elites
Regressive effects of high
inflation
Widening urban-rural
income divide
Patchy nature of state welfare
systems
Systemic market failures e.g. education /
housing
Cognitive elites and rising premium incomes Root Causes Of
Tax system is now less
progressive
Monopoly rent seeking –
power elites
Regressive effects of high
inflation
Widening urban-rural
income divide
Patchy nature of state welfare
systems
Systemic market failures e.g. education /
housing
Cognitive elites and rising premium incomes Root Causes Of
Tax system is now less
progressive
Monopoly rent seeking –
power elites
Regressive effects of high
inflation
Widening urban-rural
income divide
Patchy nature of state welfare
systems
Systemic market failures e.g. education /
housing
Cognitive elites and rising premium incomes Root Causes Of
“Half of one’s income depends on the average income of the country in which that person was born.”
Branko Milanovic, World Bank economist and expert on trends in global inequality
“8% of humanity takes home 50% of global income; the top 1% alone takes home 15%.”
Some countries have made progress
The richest 300 people on earth have more wealth than the poorest 3bn - almost half the world's population
Rising inequality
2:32:17 PM
Inequality in developing countries
Economic Effects of Rising InequalitySocial unrest and civil disobedience• Strikes and demonstrations over poor pay
and conditions at Fox con in China which produces IPhones and IPads
Self-perpetuating poverty cycle• Limited access to health care and education• Volatile incomes, high debts• Low savings
Misallocation of scarce resourcesCapital investment skewed towards preferences of the richLow collateral – limits entrepreneurshipCapital flight by the rich
Hon Hai Precision IndustryThe company started in the 1980s in Shenzhen, near Hong KongNow Fox Conn has half a million workers at inland factories and half a million at factories on China’s eastern coast including Shenzhen.
Economic Effects of Rising InequalitySocial unrest and civil disobedience• Strikes and demonstrations over poor pay
and conditions at Fox con in China which produces IPhones and IPads
Self-perpetuating poverty cycle• Limited access to health care and education• Volatile incomes, high debts• Low savings
Misallocation of scarce resourcesCapital investment skewed towards preferences of the richLow collateral – limits entrepreneurshipCapital flight by the rich
Economic Effects of Rising InequalitySocial unrest and civil disobedience• Strikes and demonstrations over poor pay
and conditions at Fox con in China which produces IPhones and IPads
Self-perpetuating poverty cycle• Limited access to health care and education• Volatile incomes, high debts• Low savings
Misallocation of scarce resourcesCapital investment skewed towards preferences of the richLow collateral – limits entrepreneurshipCapital flight by the rich
Extreme Poverty
Source: http://www.worldbank.org/content/dam/Worldbank/document/Poverty%20documents/inequality-in-focus-october2013-v12.pdf
Poverty Reduction Pathways
Source: http://www.worldbank.org/content/dam/Worldbank/document/Poverty%20documents/inequality-in-focus-october2013-v12.pdf
Inequality Reduction StrategiesHuman Capital Investment• Improving school enrolment rates• Improving the quality of teaching
Inclusive Growth Policies• Raising incomes for people• Conditional cash transfers as welfare
Micro-Finance• Small scale loans, gender empowerment• Micro-insurance to help poorest farmers
Poverty Reduction StrategiesHuman Capital Investment• Improving school enrolment rates• Improving the quality of teaching
Inclusive Growth Policies• Raising incomes for people• Conditional cash transfers as welfare
Micro-Finance• Small scale loans, gender empowerment• Micro-insurance to help poorest farmers
Inequality Reduction StrategiesHuman Capital Investment• Improving school enrolment rates• Improving the quality of teaching
Inclusive Growth Policies• Raising incomes for people• Conditional cash transfers as welfare
Micro-Finance• Small scale loans, gender empowerment• Micro-insurance to help poorest farmers
Inequality Reduction StrategiesHuman Capital Investment• Improving school enrolment rates• Improving the quality of teaching
Inclusive Pro-Poor Growth Policies• Conditional cash transfers as welfare• Productivity improvements in rural industries
Micro-Finance• Small scale loans, gender empowerment• Micro-insurance to help poorest farmers
Economic growth by itself is only weakly correlated with poverty reduction. Ravallion (2004) found that a 1% increase in per capita incomes can reduce income poverty by as much as 4% or by less than 1%, depending on the country as well as the time period. Clearly the pattern of growth matters as well as the pace
Inequality Reduction StrategiesHuman Capital Investment• Improving school enrolment rates• Improving the quality of teaching
Inclusive Pro-Poor Growth Policies• Conditional cash transfers as welfare• Productivity improvements in rural industries
Micro-Finance• Small scale loans, gender empowerment• Micro-insurance to help poorest farmers
Shared ProsperityShared prosperity is defined as “fostering income growth of the bottom 40 per cent of the population in every country” (World Bank, 2013).
Poverty Reduction Strategies
“There is probably no silver bullet, one needs to learn from experience what has worked and what has not worked, and what problem what solutions can and cannot fix.”
Esther Duflo, author of Poor Economics
Cost of Inducing Extra Education
De-worming and poverty reduction
One billion people in the world are infected with worms; yet there is cheap, easy mass treatment
This provides a cheap way of achieving an extra year of education especially in primary schools
Addressing rural poverty is key
Source: http://siteresources.worldbank.org/EXTPREMNET/Resources/EP125.pdf
Stiglitz on InequalityI see us entering a world divided not just between the haves and have-nots, but also between those countries that do nothing about it, and those that do. Some countries will be successful in creating shared prosperity — the only kind of prosperity that I believe is truly sustainable. Others will let inequality run amok. In these divided societies, the rich will hunker in gated communities, almost completely separated from the poor, whose lives will be almost unfathomable to them, and vice versa. I’ve visited societies that seem to have chosen this path. They are not places in which most of us would want to live, whether in their cloistered enclaves or their desperate shantytowns.
http://opinionator.blogs.nytimes.com/2013/10/13/inequality-is-a-choice/
Two Economists on Inequality
Recommended StructureOne Main
Point/Argument per paragraph
Analyse / Build Connectives
Use Supporting Examples &
Evidence
Then evaluate the actual point
made
Evaluate
Assess
Discuss
To what extent
Examine
Questions Requiring Evaluation
Get help for unit 4 from fellow students, teachers and tutor2u on Twitter:
#econ4@tutor2u_econ