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Inequlaity and poverty - Coggle Diagram
Inequlaity and poverty
measuring inequality and poverty
Terminology
equality-situations where economic outcomes are similar for different people or different social groups
equity-idea of fairness and is a normative concept
income inequality- unequal distribution of income to households
wealth inequality-differences in the amount of assets that households own
absolute poverty-situation where individuals cannot afford to acquire the basic necessities for a healthy and safe existence
relative poverty-situation where households income is a certain percentage less than the median household incoin the economy
Lorenz curve
visual representation of the income inequality between households
presented in quintiles or deciles
more equal income distribution is desired as it reduces poverty
Gini coefficient
gini coefficient=A/(A+B)
A= area between line of equality and lorenz curve
B=area under the lorenze curve
value of zero represents absolute equality and 1 represents perfect inequality
Measuring poverty
use indicators
energy consumption per person
number of girls completing primary education
International Poverty Line (IPL)
Minimum Income Standard (MIS)
composite indicator - Multi-dimensional Poverty Index (MPI)
launced by Oxford Poverty and Human Development Initiative
uses survey to measure the complexity of poor people
tracks deprivation across 3 dimension (health,education,living standards) and 10 indicators
the survey first identifies which of these 10 deprivations each households experienced
poor if they suffer deprivations across 1/3 or more of the weighted indicators
useful for ngo to reduce poverty
Difficulties
multi-dimensional concept
measured through self reported surveys
poor households may exhibit very different characteristics
urban households maynhabe different ideas of their poverty level compared to rural
urban areas have higher immigrant households
rural households may remain in long-term poverty
Causes of inequality and poverty
causes of inequality
Differences in human capital
inequality of opportunity
different levels of resource ownership
discrimination
unequal status and power
governemnt tax and benefits policies
globalisation and technological change
market based supply side policies
costs of income and wealth inequality
Impact on economic growth
disincentive for workers to work
resources not used efficiently
government unemployment payment increased
impact on living standards
inequality increases, rich get richer, poor gets relatively poor
reduce standards of living
impact on social stability
political instability,strife,social unrest,revolution
Using taxation to reduce inequality and poverty
Direct taxes
paid directly to government
income tax,capital gains tax
imposed on income and profits
indirect taxes
imposed on spending
Value added tax, tax on cigarettes
Tax systems
Progressive
income increased,larger percentage of income is paid in tax
Regressive
as income rises, a smaller percentage of income is paid in tax
indirect tax
Proportional
As income rises, the same percentage of income is paid in tax
Other policies to reduce inequality and poverty
Investing in human capital (eg:education)
investing in supply side policies
higher human capital
More generous transfer payments
give to the poorest
unemployment payments
higher wages
establishment/increase of national minimum wage
set above free market rate
higher wages
establishing a universal basic income
guaranteed minimum income
minimum income for all
targeted government spending on goods and services
provide more school
higher human capital
policies to reduce discrimination
less discrimination
