Poverty and inequality part 2

higher poverty

larger share of top 1% in the country

extent of relative poverty

increased by 6 millions since 2008; 25% of EU; 45 million of Americans

income inequalities between countries are less concerning than

income distributions within countries

equality of opportunity

prerequisitional circumstances do not matter in the determination of the outcomes

ex-ante concept

judged "before the event"

equality of outcomes

outcomes today determine opportunities tomorrow

ex-post concept

judged after the action had been taken

equality of opportunity provides a 'level playing field'

not that each person has an equal chance to succeed, but that everyone 'plays' by the same set of rules

intergenerational earnings elasticity

model that captures the statistical connection between parents’ income and their children’s income in later life; higher coefficient means lower intergenerational mobility

components of income

individual earnings, capital incomes, transfers, disposable income, 'living standards'

capital incomes

dividends/interests on savings accounts/shares

transfers (in income)

reassigning ownership of monetary funds/assets to a new owner/acount

household market income

earnings of person 1 + earnings of person 2 + income from capital

• private transfers

what level concept are earnings and income on

earnings - individual level, income - household level

household disposable income

household market income + state transfers - direct taxes

household equivalised disposable income

household disposable income divided by the number of equivalent adults

household extended income

household equivalised disposable income + value of public goods(health, education, social care)

needs-based justice

making sure that everyone is able to fulfill basic needs and participate in the society(but doesn't consider non-material welfare like autonomy) -> unconditional basic income

perfomance-based justice

earnings should be based on contribution(hard to measure objectively)-> Austrian pension scheme

market-based justice

“objectivity-assessment” is made by the market -> wage equals marginal productivity

justice of opportunities

same intial starting points -> positive discrimination

participatory justice

same chance of participating in the society -> equal access to services and infrastructure

90/10 income ratio

compares the two extremes of income distribution(richest and poorest)

90/50 income ratio

compares incomes of richest to middle class

50/10 income ratio

distribution of income among relatively poor population

mean income

total income divided by number of groups

median income

number in the middle of income distribution

endogeneous fiscal policy

inequality leads to political discontent -> re-distributive policies that harm growth

human capital accumulation theory

poor people aren't able to invest enough in their education

declining incomes of the poor together with higher income shares of the rich result in...

lower aggregate demand (rich people have a lower propensity to consume and may save rather than re-invest money)

OECD study

most up-to-date data and methods; strong negative link between inequality and growth; works through human capital accumulation channel

status anxiety

income inequality places people into status competition and causes stress

“keeping up with the Joneses”

low position in social status hierarchy is stressful to most people

social evaluative threat

if people are made even subtly aware that they belong to a group regarded as performing poorly in the test areas, they perform worse than if they are not been made aware

race between educationa nd technical change

abstract tasks done by 'educated' people cannot be easily replaced by technology

routine tasks replaced by computers lead to ...

squeezing of the middle skill(income) jobs

division of surplus between wage and profit is determined in part by ...

the relative bargaining power of two parties

social, fiscal, and union pressure after WWII meant that

high wage earners were simply unable to increase their salaries back to pre-war levels while those at the bottom did rise

winner-takes-all markets

globalization means bigger markets, profits and incomes; CEO's pay related to company performance

emissions by top 10%

half of world individual emissions

emissions of bottom 50%

12% of world emissions