Tag: inequality

Globalisation has reduced the bargaining power of unskilled workers and pushed up inequality in many western countries, the OECD said, urging governments to improve their social safety nets.” With the gap between rich and poor widening once again, the media have been considering the impact of widening income and wealth distribution. The articles below look at this widening gap and also at the ways in which the rich are using their money.

Gap between rich and poor widens Guardian (20/6/07)
For the super-rich it’s all give and take – at record levels Guardian (20/6/07)
Looking after the super-rich BBC News Online (Evan Davis blog) (9/8/07)

Questions

1. Define what is meant by the terms (i) Lorenz curve and (ii) Gini coefficient.
2. Using illustrations as appropriate, show how the Lorenz curve and the value of the Gini coefficient have changed in the past decade.
3. Assess the likely impact on the major macroeconomic targets of growing income inequality.
4. Discuss policies that the government could put in place to try to reduce the level of income inequality.

During the period that Mrs Thatcher was in office, the post-war trend towards greater equality of income was reversed. Although some of the changes the Labour government has made since 1997 have helped those on lower incomes, the rise in incomes at the top of the scale has meant that the gap between rich and poor has widened again. The article below from the Guardian looks at the latest figures on income inequality.

Inequality at same level as under Thatcher Guardian (18/5/07)


Questions
1. Define the terms (a) Lorenz curve and (b) Gini coefficient.
2. Given the changes in income distribution outlined in the article, discuss how the value of the Gini coefficient has changed since 1997.
3. Draw Lorenz curves to show the changes that have taken place in income distribution during Mrs Thatcher’s period in office and during Tony Blair’s time in office.
4. Analyse two policies that the government could introduce to reverse these income distribution trends.

With the news this month of the death of Boris Yeltsin, it has been an opportunity to look back at the economic legacy of the first democratically-elected President of Russia. Boris Yeltsin took over at a time when all goods were scarce and the industrial infrastructure was crumbling. He adopted policies of extensive privatisation and abandoned price controls. To what extent has this created the Russia of today and what is the legacy he has left behind?

Yeltsin’s moment The Economist (subscription) (26/4/07)
Yeltsin’s economic legacy BBC News Online (24/4/07)

Questions

1. Explain the reasoning behind the policies that were adopted by Boris Yeltsin in his early years in office.
2. Discuss the extent to which those policies enabled the development of the Russian economy.
3. Assess the current state of the Russian economy.

In the Guardian article linked to below, Ashley Seager argues that the only way to reduce the extent of social exclusion is to tax the main asset of a large proportion of the population; their house. He argues that the massive increases in land values that have taken place with rising house prices have increased divisions in society and that a land tax is required to address this. It may be interesting to consider this issue along with News Item 4 about global wealth distribution.

A land tax is 200 years overdue Guardian (8/1/07)

Questions

1. Explain what is meant by a land tax and suggest different ways that this could be levied.
2. Discuss the likely impact of a land tax, as proposed by Ashley Seager, on the major economic targets.
3. Analyse possible alternative policies to reduce the levels of exclusion in UK society.

A United Nations report on wealth distribution has found that the world’s richest 1% own 40% of the world’s wealth. Europe, the US and some Asia Pacific countries account for most of the world’s wealthiest with 30% of them living in the US. So is this a problem and should we, or indeed can we, do anything about this. The article below from the Guardian looks at these issues in more detail.

World’s richest 1% own 40% of all wealth, UN report discovers Guardian (6/12/06)

Questions

1. Examine whether the fact that the richest 10% in the world own 85% of all world assets is likely to cause problems for developing countries.
2. Suggest two policies that a developed country could use to narrow wealth distribution and evaluate the likely impact of these policies on the level of economic growth.
3. “”In some ways, wealth is more important to people in poorer countries than in richer countries.” Discuss the extent to which this assertion from the article is likely to be true.