🪴 Maixnor WU

Inequality

Nov 04, 20254 min read

Concepts

Absolute vs Relative Poverty

  • economic growth → reduction in absolute poverty
    • covid reversed some of that
  • below 2.1 USD per day deemed not sufficient for productive life
    • different measure is needed
  • social exclusion → relative poverty
    • poor people vs rich people
    • if there were no rich people there would be no poor people
    • high income → high relative poverty rate
  • Scissors of average income
    • top 1% rising
    • bottom 50% dropping
  • what is interesting?
    • Opportunity or Outcomes?
    • how to measure income?
    • how to measure inequality?

Opportunity or Outcome?

  • example running race
    • opportunity → start
    • outcome → leaderbord
  • related
    • fixing one will fix the other
  • measuring Income
    • sum (earnings of participants) + capital income + private transfers
    • = household market income
    • = household equivalised disposable income
      • different scalings with larger households
        • transport → exponential
        • food → linear
        • heating → constant
    • = Household extended Income

Based Justice(s)

Needs Based Justice

  • Inequality-focused
  • resource allocation based on necessity

Performance Based Justice

  • Merit-oriented
  • rewards based on achievement and contribution

Market Based Justice

  • Supply-demand influenced → Supply And Demand
  • driven by economic transactions and value

Opportunity Based Justice

  • Access-focused
  • emphasizes equal chances for success

Participatory Justice

  • Involvement-centric
  • encourages community engagement in decision-making

Environmental Justice

  • Sustainability-oriented
  • addresses ecological equity and rights

Measure Inequality

  • GINI Index
    • higher GINI Index → higher inequality
  • Upper Tail Inequailty → 90:50 ratio, 99:90 ratio, 100:99 ratio
  • Lower Tail Inequality → 50:10 ratio
  • Mean/Median ration → Greater outliers on top/bottom of income distribution

Why should I care?

  • endogenous fiscal policy
  • human capital accumulation theory
    • untapped potential
    • e.g. education
      • poorer children leaving school earlier
  • higher shares of rich
    • lower propensity to consume
      • more saving
      • less re-investment or spending
  • negative link of inequality and growth
  • Book The Spirit Level by Richard Wilkinson and Kate Pickett
    • life expectancy
    • physical health
    • mental health
    • drug abuse
    • obesity

Consequences

Life Expectancy

  • wontfix get image from life expectancy/income diagram
    • higher development → higher life expectancy
    • income is pointless → money cannot be eaten
      • income can only pay for healthcare etc
  • wontfix get image of tube system with life expectancy

Linked Social Aspects

  • wontfix get diagram of inequality vs health and social problems
    • correlation between inequality and social health
  • other linked aspects
    • CO2 emissions
    • democracy
    • crime (and status anxiety)
    • education
    • health

Causes

Direct Access

  • Lack of access to
    • health care
    • good food
    • plenty exercise
    • education

Status Anxiety

  • not on top of the monkey rock
  • low Social Status
  • social hierarchy / ladder
  • leading to stress, leading to poor health

Others

  • Stress in the womb
  • parents socio-economic status

Education

  • parent’s income significant in children’s performance
  • babies already affected by parents’income
  • IQ is related to income of parents
  • just knowledge of social status degrades performance
  • black/white students perform significantly different in “knowledge tests” but the same in “problem solving tests”
    • african-american students perform worse in “knowledge tests”

Social Graduation

  • due to Social Status, not due to IQ or Ability
  • wontfix get more from slides (56)
  • positive feedback look → reinforcing effects

Populist Voting

wontfix get from slides

Climate Change

Education Gap

  • demand for university students was hit
    • pay decreased
  • wontfix slides get image from skill percentile to tasks
  • higher skill level → more abstract, less routine and manual tasks

Automation Impact

  • Most middle-skilled jobs automated by computers
  • high-skilled jobs still in high demand
  • low-skilled jobs hard to automate → not yet obsolete
  • 47% of jobs will be destroyed in the next 20 years (USA)

Trade

  • import competition only affects blue-collar workers
  • wontfix slides get more

Market Forces

Explanations

wontfix slides get more

  • CEO Compensation

Backlinks