Economic Development I - Lecture 2: Poverty and Inequality

This set of flashcards covers key vocabulary and concepts from the lecture on Poverty and Inequality.

Poverty Rate

The proportion of individuals in a country who cannot reach an arbitrary (material) standard of living.

Poverty Headcount Ratio

The fraction of the population earning below the poverty line.

Poverty Gap

A measure that accounts for the degree of poverty by assessing how far individuals are from the poverty line.

Average Poverty Gap (APG)

A measure calculated using the formula: APG = rac{Q}{N} imes (z - y_q) where Q is the poverty headcount, N is the total population, z is the poverty line, and $y_q$ is the average income of those below the poverty line.

Purchasing Power Parity (PPP)

An economic theory that allows the comparison of the purchasing power of various world currencies to one another.

Lorenz Curve

A graphical representation of income distribution, showing the proportion of total income earned by cumulative percentages of the population.

Gini Coefficient

A measure of inequality of income distribution, ranging from 0 (perfect equality) to 1 (perfect inequality).

Kuznets Hypothesis

A theory suggesting an inverted-U relationship between income inequality and economic development, where inequality first increases then decreases as a country develops.

Extreme Poverty

Living below the International Poverty Line of $3 per day, adjusted for inflation and living costs.

Inequality

A measure of the disparity in income or resources among individuals or groups in a society.