Poverty and Income Inequality

macro

poverty

inability to satisfy minimal consumption needs

absolute poverty

the inability of an individual or a family to afford a basic standard of goods and services, where this standard is absolute and unchanging over time

relative poverty

the inability of an individual or a family to afford an adequate standard of goods and services, where the adequate standard is relative and changes over time

income equity

fairness in how income is distributed through the population

income equality

income is distributed equally to everyone that every worker earns the same level of income

lorenz curve

a diagram showing the cumulative percentage of national income earned by the various percentiles of the population

gini coefficient

a statistical measure of the degree of variation or inequality

causes of poverty

• low income

• unemployment

• low levels of human capital

• low levels of capital/land ownership

• limited social services (education and healthcare)

• poverty (repeating vicious cycle)

• market-based supply-side policies like deregulation, privatization, and trade liberalization

• discrimination, geography, age, etc…

consequences of poverty

• low living standards

• lack of access to healthcare and education

• social problems/instability

• high infant, child, and maternal mortality

• inability to realize full potential

income distribution measures

• transfer payments

• subsidy/direct provision of merit goods

• government intervention: minimum wage, food price ceilings, farmer price floors

• progressive income taxes

• wealth taxes

• indirect taxes