Economics
Income Inequality
Income inequality refers to the unequal distribution of income among individuals or households within a society. It is often measured using metrics such as the Gini coefficient, which quantifies the disparity in income distribution. High levels of income inequality can have social and economic implications, including reduced social mobility and potential negative effects on overall economic growth.
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10 Key excerpts on "Income Inequality"
eBook - PDF- P.M. Ananth(Author)
- 2020(Publication Date)
- Society Publishing(Publisher)
1.1. INTRODUCTION Income disparity can be defined as the significant inequality in the income distribution between two individuals, groups, populations, social classes, or countries. Income disparity is a key dimension of social class and social satisfaction. It highly affects and gets affected by various other forms of inequality like inequalities of wealth, social status, and political power. Income is known as the main determinant of the quality of life which affects the well-being as well as the health of people and their families and differ by certain social factors such as age, sex, race, or ethnicity. Income disparity mainly refers to the changing incomes of the different socioeconomic groups in a particular economy. At times, people refer it to the ‘income gap.’ It spots the gap between those people who earn the highest and the lowest income in a region, a country, or a whole world. Income disparity exists when there is not an equal distribution of incomes through different groups of individuals as well as households in an economy. Income disparity generally compares the socioeconomic groups. On the other hand, it may also compare the incomes of males versus females, or white people versus African Americans. On a universal level, income disparity is very extreme by any measure, with the richest 1% people in the whole world getting as much as the bottom 56% in the early 21 st century. Within the US, income disparity is found to be much greater as compared to some other developed nations. In the year 2014, the richest 1% of people got 22% of the total income, and the top 10% of the US households got around 60% of the total income. The occupation of a person is a key basis for differences in income for most of the people. In more-developed nations like the United States, salaries, and wages are the main source of income for most households. On the other hand, property such as capital gains is the main source for most of the affluent.
No longer available |Learn moreWorld on the Move
Consumption Patterns in a More Equal Global Economy
- Paolo Mauro, Tomas Hellebrandt, Jan Zilinsky(Authors)
- 2016(Publication Date)
This chapter examines how economists measure inequality. It discusses the challenges posed by survey data and explains a novel method of reconciling surveys with national account measures of household consumption. This method results in higher estimates of inequality within countries than indicated by survey data alone. The chapter then discusses recent trends in inequality within countries and the cross-country relationship between inequality and the level of development. The results can be used to inform projections of within-country inequality into the future.How Do Economists Measure Inequality? Key Concepts and IssuesThe most straightforward way of finding out about individuals’ incomes or consumption is to ask them directly. A household survey can provide a good approximation of the distribution of living standards in the population at large, provided that its sample is nationally representative and respondents answer honestly.The Gini IndexSuppose all households participating in a survey are lined up in ascending order of household income. How would one capture the income disparities between them in a single number? Many measures have been put forward over the years, with different properties and varying degrees of relevance, depending on the specific question one is trying to answer (see Cowell 2011 for a discussion).The best-known and most widely used measure of inequality is the Gini index (also referred to as the Gini coefficient). It is presented by means of the Lorenz curve, which plots the proportion of the total income of the population that is cumulatively earned by the bottom x percent of the population. The Gini index is equal to the ratio of the area (G) between the Lorenz curve and the line of perfect equality to the area of the triangle ABC in figure 3.1 . It takes values between 0 and 100. Perfect equality is achieved when the bottom x percent of the population receives x percent of total income, in which case the Lorenz curve overlaps with the line of perfect equality and the Gini index equals zero. Perfect inequality occurs when all income goes to a single person, in which case the Lorenz curve is ABC in figure 3.1
No longer available |Learn moreWorld Social Report 2020
Inequality in a Rapidly Changing World
- Department of Economic and Social Affairs(Author)
- 2020(Publication Date)
- United Nations Publications(Publisher)
This growing evidence base has helped ensure consideration of Income Inequality as part of the international development agenda. This section summarizes what is now a broad and burgeoning technical literature on the topic. Considering that each indicator of economic inequality has strengths and limitations, the analysis uses several indicators to assess progress – or lack thereof. Section B illustrates how access to opportunities and resources continues to depend on group attributes such as ethnicity and race, migrant origin, and socioeconomic and disability status. The focus is on the dynamics of group-based inequality – that is, on whether development is equalizing opportunities among groups or, rather, is leaving some groups behind. Section C discusses why inequality matters, focusing on the effect of high and growing inequality on economic growth, poverty, social mobility and political stability. A. Economic inequality People’s opportunities in life and the future of their children are largely shaped by their income and wealth. Now five years into implementation, the 2030 Agenda has focused the attention of the international community on the predicament of growing economic inequality. Real and sustained progress in addressing it, however, has eluded most countries. The evidence presented in this section shows that economic inequality has been on the rise in most high-income countries over the past 30 years but has declined in several low- and middle-income countries. Where inequality has risen, increases have 8 Target 10.1 is to progressively achieve and sustain income growth of the bottom 40 per cent of the population at a rate higher than the national average by 2030. INEQUALITY IN A RAPIDLY CHANGING WORLD 21 been largely due to the rapid rise in top incomes. Even though economic inequality among countries has declined, it is still more pronounced than that observed within countries. Chances in life continue to depend on the country in which a person is born.
eBook - ePub- Nan Dirk de Graaf, Dingeman Wiertz, Nan de Graaf(Authors)
- 2019(Publication Date)
- Routledge(Publisher)
7 Economic inequality Chapter overview We begin this chapter with a brief discussion of why economic inequality is problematic, followed by a review of inequality trends around the world. Whereas Income Inequality has increased within most countries since the 1970s, global Income Inequality has remained stable during most of the twentieth century and has started to decline in the last few decades. This latter trend is driven by reductions in the inequality between countries, and global poverty has dropped accordingly. However, extreme poverty remains persistent in many parts of the world, and we discuss several theories to explain why this is the case. In addition, we examine what is happening in terms of income and wealth at the other end of the distribution, to the so-called “top one percent”. Next, we consider the relationships between inequality, national income, and economic growth. We demonstrate that it is in this regard important to distinguish between comparisons of different countries at a single point in time versus comparisons within countries over time. We also address the impact of inequality on the well-being of individuals and society more generally, concentrating on the influence of inequality on health as well as intergenerational social mobility. Economic inequality as a problem To what extent one regards a certain level of inequality as problematic and cause for state intervention will depend on which of the three political ideologies discussed in Chapter 1 one adheres to: socialism, liberalism, or conservatism. In general, liberals will be most tolerant of economic inequality and socialists the least. The former firmly believe in the value of the market as allocator of resources and distributor of wealth, while the latter often regard market outcomes as unsatisfactory. They therefore call on the state to step in and redistribute resources in order to achieve a more equal distribution
eBook - PDFChina's Economic Growth: Towards Sustainable Economic Development and Social Justice
Volume II: The Impact of Economic Policies on the Quality of Life
- John Joshua(Author)
- 2017(Publication Date)
- Palgrave Macmillan(Publisher)
As data on inequality of wealth are often difficult to obtain, inequality of income is often used as a proxy. Aghion et al. (1999) argued that to use Income Inequality as a proxy for wealth provides no difficulties ‘since both measures of distribution generally vary together in cross-sections’ (pp. 1617–1618). However, the distribution of wealth and income can have a different impact on economic growth. The excessive accumula- tion of wealth may be more detrimental for economic growth than an inequality of income because wealth is often channelled into unproduc- tive assets. 4 The Distribution of Income 87 Aghion et al. (1999) raised an important question: ‘can the negative impact of inequality on growth be reduced by redistribution?’ (p. 1619). If unequal income is perceived as being harmful to economic growth, a redistribution of income from higher income earners towards lower income earners will be beneficial in terms of economic growth. The share of wages as a proportion of gross domestic product (GDP) has declined considerably. The distribution of income affects aggregate output and therefore growth. China achieved one of the highest growth rates of eco- nomic growth by 2000 but at the same time sharply increased its inequal- ity of income. Inequality of per capita nominal GDP between the regions began to increase only during the 1990s. China’s economic growth can be sustained in the long run only if workers are able to share in the increase in the nation’s wealth—that is, if a xiaokang (moderately prosperous) society in which the living standard is increased to turn China into a consumer-oriented society can be implemented. As Galbraith (1971) argued in The Affluent Society, once voters have obtained a sufficient level of material wealth, they will vote against the common good. Hence the decision-making process cannot be left com- pletely in the hands of the public. Inequality cannot be ameliorated when powerful interest groups compete with one another.
eBook - PDF- Lucas Chancel, Thomas Piketty, Emmanuel Saez, Gabriel Zucman, Lucas Chancel, Thomas Piketty, Emmanuel Saez, Gabriel Zucman(Authors)
- 2022(Publication Date)
- Belknap Press(Publisher)
CHAPTER 1 Global economic inequality: insights WORLD INEQUALITY REPORT 2022 19 What is the level of global economic inequality today? ............... 20 Global income and wealth inequality between individuals: initial insights ......................................................................................... 20 Global income and wealth inequality between countries.............. 22 Income Inequality varies significantly across regions ..................... 24 Differences in inequality are not well explained by geographic or average income differences.................................. 27 The geographical repartition of global incomes .............................. 27 The limited impact of redistribution on global inequality ............ 28 The complementarity between predistribution and redistribution ........................................................................................ 31 The extreme concentration of capital ............................................... 32 Box 1.1 Income and wealth inequality concepts used in this report ................................................................................. 38 Box 1.2 The WID.world and Distributional National Accounts Project ........................................................................................... 38 Box 1.3 The rich ecosystem of global inequality data sets ................. 40 Box 1.4 Impact of the Covid crisis on inequality between countries ...................................................................... 42 Box 1.5 Impact of the Covid shock on inequality within countries ........................................................................... 42 Box 1.6 What is the relationship between Gross Domestic Product, National Income and National Wealth? .................................. 46 Box 1.7 Comparing incomes, assets and purchasing power across the globe .............................................................. 47
No longer available |Learn moreImagine There's No Country
Poverty, Inequality, and Growth in the Era of Globalization
- Surjit S. Bhalla(Author)
- 2002(Publication Date)
Research over the years, which is documented extensively in this chapter, supports this result. However, it should be emphasized that the Kuznets inverted U-curve applies to what happens within countries over time; what happens to inequality among the collection of individuals in the world, over time, is quite another story. Indeed, it is theoretically possible (and empirically true!) that each country can experience a worsening of inequality and yet overall improving inequality—a possibility, and finding, missed by most research to date. Measuring Inequality This chapter discusses issues relating to the measurement of inequality, and it introduces such concepts as the Lorenz curve and the inequality Gini index. After measurement is out of the way, the chapter goes on to discuss perhaps the most important development in the study of the economics of inequality during the past 50 years—the Kuznets inverted U-curve, which relates the path of inequality to the path of development. This inverted U-curve can be tested in a variety of ways. The chapter reviews the results of the various tests and reaches a threefold conclusion: During short periods of time (a decade or so), inequality does have a tendency to worsen. During long periods, it appears that the level of inequality on the right side of the inverted U is approximately equal to that on the left. And data for the past 20 years indicate that, on average, country inequality has definitely worsened. The study of income distribution is a study of shares in the pie—who has what amount. The best-known of the descriptions of the pattern of income distribution is the Lorenz curve: If the population is ordered according to income, the Lorenz curve plots the cumulative share in income ( y -axis) versus the cumulative share in the population ( x -axis). By definition, therefore, the Lorenz curve starts at zero and ends at unity (figure 3.1 plots such a curve for three different years—1960, 1980, and 2000).
eBook - PDFMalaysia's Socio-Economic Transformation
Ideas for the Next Decade
- Sanchita Basu, Lee Poh Onn(Authors)
- 2014(Publication Date)
- ISEAS Publishing(Publisher)
Some of the indicators of inequality will also be decomposed into “within group” and “between group” components to give a deeper understanding of the income distribution situation. Section 3 offers several explanations regarding the changes in income distribution, while Section 4 will provide some policy recommendations to narrow Income Inequality in Malaysia. Section 5 concludes the chapter. Trends in Income Inequality Table 16.1 shows that the Gini ratio reflecting the overall income distribution rose from 0.513 in 1970 to 0.557 in 1976, falling to 0.442 at the end of the NEP period, and thereafter oscillating to reach 0.441 in 2007. Table 16.1 also shows that income distribution in both the rural and urban areas exhibit similar trends over the NEP period. The Gini ratio for rural households rose between 1970 and 1976 but fell thereafter to 0.401 by 1992. It also exhibited fluctuating values after this, falling to its lowest level in 2007 but rising again to 0.407 in 2009. The urban Gini ratio also followed the same pattern, but generally at a higher level, reaching its lowest level in 1997, then widening again to reach a local peak (0.444) in 2004, before moderating to 0.423 in 2009. Income disparities between urban and rural areas remain high. It managed to come down to 1.7 in 1990, but rose again to 2.11 in 2002 and 2004 before falling to 1.91 in 2007 and 1.85 in 2009. The decompositions of the inequality measures show that most of the inequality is explained by the “within group” component and a much smaller proportion is explained by the “between group” component, that is, within the urban or the rural areas themselves, rather than due to the urban-rural differences (Ragayah 2009). Examining the values of the Gini for the various states reveals that, with a few exceptions, states with high inequality tend to have high incidence of poverty.
eBook - PDF- R. Layard(Author)
- 1999(Publication Date)
- Palgrave Macmillan(Publisher)
Finally we turn to lifetime welfare, which we consider the most relevant measure of fundamental inequality. It is this which we use in section II, where we show how to analyze the equity and efficiency implications of various policy options, using the Atkinson equality measure which embodies an explicit equity-efficiency trade-off. The main results of the study are summarized in section III. They relate to Great Britain and are based on the General Household Survey for 1975, which provided usable data on 4027 couples where the husband was under 65 and not self-employed nor permanently disabled (OPCAS, 1978). I EXPLANATION Annual money income We begin by trying to explain the gross money income of the family over a year (F). 1 We measure its inequality by the coefficient of variation (CF). This is more intuitively interesting than the standard deviation. It is also more readily decomposable than the standard deviation of the log, since money income is a sum of incomes of different types, some of which are often zero. The coefficient of variation of family income is 0.51. 2 This compares with the inequality of the individual components of family income as follows: husband's earnings (Y\), 0.48; wife's earnings (Y2), 1.24; unearned income 3 (I), 5.03. So family income is a bit more unequal than men's earnings but much less unequal than women's earnings or unearned income. Sources of income How much do the various components contribute to the overall in- equality?^ The decomposition proceeds _as_ follows: F = Y\ + Y2 + /, so F/F = (Y 1 /F)(Y 1 /Y 1 ) + (Y2/W2/Y2) + Q/F)(I/I) or / = a m + a 2 y 2 + a 3 i where lower case letters denote variables relative to their means and a\, a 2 , and 03 are the shares of each component in the average. 4 In our case / = 0.784yi + 0.179y 2 + 0.037*'. It follows that var (/) = var (0.784vi + 0.179y2 + 0.037/).
eBook - PDFDevelopment Economics
Theory and Practice
- Alain de Janvry, Elisabeth Sadoulet(Authors)
- 2021(Publication Date)
- Routledge(Publisher)
INEQUALITY AND INEQUITY | 181 model (see Chapter 8). But recent empirical evidence shows that poor people can have high rates of savings. In China, for example, incomes are still low, but the personal rate of savings is 38 percent, in part motivated by precaution due to lack of insurance and social security coverage. But this savings by the poor will only translate into investment if the poor have access to safe and profitable savings instruments, such as formal financial services, in ways that make their savings available for investment. On the negative side, the relationship between inequality and growth involves the role of credit market failures, whereby the poor lack collateral to access credit. This implies that wealth inequality reduces investment by the poor in productive projects, education, and insurance, at a cost to growth. Persson and Tabellini (1994) made the political argument that higher inequality pushes the median voter into demanding more redistributive policies, and hence higher tax rates that deter investment (Figure 6.12). The pessimistic view of the impact of inequality on economic outcomes through the political process was most comprehensively argued by Stiglitz (2012) in his recent book The Price of Inequality. Instead of using the theory of the median voter, as Persson and Tabellini do, he uses the theory of rent-seeking (that we will review in Chapter 21). Stiglitz’s argument is that concentrated economic power (inequality) leads to concentrated political power and, through rent-seeking, to changes in market and political rules favoring the top 1 percent in the distribution of income.
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