poverty and inequality

• Lorenz curve: 


  level of inequality in a particular country
• Formula=


  A/ A+B
• Lorenz curve


  Further, it is from the line of equality more inequality
• GINI coefficient 


  in the UK 0.34
• Rise in GINI 


  shows a rise in inequality
• GINI coefficient


  between 0-1
• Higher number of GINI

  more inequality
• Inequality


  Inequality above 0.4 links to political instability
• Lowest GINI coefficient 


  Ukraine
• Highest GINI coefficient 


  South Africa
• gov intervention of GINI

  • high minimum wage
  • higher rates of income tax
  • subsides for childcare
• What is childcare is UK price

  2000 per year
• Absolute poverty:


  being unable to afford necessities such as food, and clean water living on less than 1.90 a day
• Relative poverty:


  less than a particular percentage of a country's average income less than 60% of median income
• important factors influencing poverty rates:

  infrastructure- high productivity = high income low absolute poverty
• important factors influencing poverty rates

  education/training= high unemployment = low income
• AID:


  low poverty if spent on healthcare/ education, workers are more productive, increased incomes however may increase poverty if goes to bad politicians
• Average CEO


  Paid around 272x more than average worker in 2017
• Lorenz curve


  cumulative income/ population
• 0=


  perfect income equality
• 1=


  total income inequality
• wealth inequality


  sum stock of assets shared unequally
• changes in inequality:


  Education

  Unemployment

  Trade union
• Minimum wage rate:


  1998= national minimum wage- the poor will earn more firms costs will increase and profits decrease along w the rich
• Assortative mating


  rich have kids with the rich = worse inequality
• social benefits and tax

  Progressive tax= tax increases as income increases
• social benefits:


  progressive tax = tax revenue = government spending
• R>G


  GROWTH RATE: 3.8% average rate increased by 3.8%
• IF R is greater than G

  RICH WILL GET RICHER
• Average annual rate of return

  5.3%
• inheritance increases inequality
• income = flow of wages
• income inequality= uneven allocation of income from employment
• inequality can act as an incentive to work harder/ risk take
• Wealth can generate more income
• Higher-income allow people to build wealth
• Economic costs of inequality:

  • reduce economic growth
  • workforce productivity
  • human cap development
• the social cost of inequality

  1. crime and health issues
• The Kuznets curve 


  a country develops from a largely subsistence enconomy
• Free market economists' view on inequality

  lower tax= faster growth = reduce inequality = trickle-down effect = growth creates jobs however argument can be seen as poor due to pro active pro-poor government inventions are needed to fix inequality