ECON 115: Inequality

In an income distribution, what specific point identifies that 50% of the distribution is above and 50% is below

The median

When describing economic distributions, what is another term for the geometric mean?

The average

If an income distribution is skewed such that the median is lower than the average, what does this indicate about the data?

There is a concentration of higher incomes pulling the average upward

Quantile

Segment of an ordered distribution, like a quintile or decile

Definition of a bottom quintile share, in an income distribution

Fraction of all income accruing to the bottom 20 percent of the ordered distribution

How does income differ from wealth in terms of variable types

Income is a flow variable whereas wealth is a stock variable

What is the economic formula for calculating a household’s current wealth?

Wealth= (last year’s wealth) x (1+r) + thisyear’s savings

According to Pickett and Saenz how did income inequality in the US and Europe compare a century ago versus today?

It was larger in Europe a century ago, but is now much larger in the United States

What pattern did the wealth income ratio follow in Europe according to Piketty and Saez?

U -shaped pattern

In a low-growth society, what becomes the primary driver for obtaining more income?

Accumulating capital

In growth models, the growth rate of the economy is the sum of population growth and _____

Productivity growth

What is the main driver of both income and wealth?

Capital

If return rate to capital is greater than the overall growth rate of the economy, what happens to wealth inequality

It increases as wealth accumulates in the hands of those who already hold capital

In the context of the r>g debate, what does the variable r represent?

The net-of-tax rate of return to capital

In the context of the r>g debate, what does the variable g represent?

The overall growth rate of the economy

Prior to the 20th century, what was the approximate magnitude of r−g?

Around 4% percent

What curve maps the population percentile on the x-axis against the cumulative income share on the y-axis?

The Lorenz curve

How is the Gini Coefficient mathematically defined in relation to the Lorenz Curve?

Twice the area between the 45-degree line of perfect equality and the Lorenz Curve.

What Gini Coefficient value represents a state where one person has everything and everyone else has nothing?

1

What Gini Coefficient value represents a state where everyone has the exact same income?

0

90-10 ratio (D9/D1)

The ratio of the income at the 90th percentile to the income at the 10th percentile.

What is the '20/20 ratio' (also known as the 80-20 shares)?

The ratio of the income share held by the top 20% to the share held by the bottom 20%

The Palma ratio compares the income share of the top 10% to the income share of which other group?

The bottom 40%

How is 'discrimination' defined within economic models of inequality?

The percentage of the data that the model cannot explain using observable factors.

In the classic example of women being paid 0.78 for every 1.00 a man earns, how much of the 0.22 gap is explained by factors like experience?

0.11

What is the 'Poverty Line' or 'Poverty Threshold'?

The annual income level below which a family is considered poor.

Absolute Poverty Line

A fixed income level set by the government for each family size below which a family is deemed in poverty.

What measure is defined as the percentage of the population with family incomes falling below the poverty line?

The Poverty Rate

What annual estimate did Statistics Canada produce prior to 2019 to measure relative poverty?

Low-Income Cut-offs (LICO).

In 2018, the Canadian government announced that which measure would be the official poverty rate going forward?

The Market Basket Measure (MBM).

The Market Basket Measure (MBM) determines the poverty line based on the cost of which five categories of goods and services?

Food, clothing/footwear, shelter, transportation, and other basic goods/services.

Why is the Market Basket Measure (MBM) considered more sensitive than national relative measures?

It accounts for regional differences in the cost of living.

What term describes the study of how persistent poverty or wealth is across different generations

Intergenerational inequality

According to data on transition probabilities, how does the earnings persistence of sons born to top decile fathers compare between the US and Canada?

It is higher in the United States, meaning sons are more likely to stay in the top decile.

Currently, what factor accounts for more than 80% of global income differences according to Branko Milanovic?

Large gaps in mean incomes between countries (location)

In 1850, what was the estimated ratio between the mean incomes of the richest and poorest countries

Less than 4 to 1

In 2007, what was the estimated ratio between the mean incomes of the richest countries (US/Norway) and the poorest (Nepal/Ghana)

31 to 1

Bourguignon and Morrisson estimated the global Gini coefficient in 1850 to be approximately _____.

53.2 points

What alternative inequality index does Milanovic use to decompose global inequality into 'class' and 'location'?

The Theil index

By the year 2000, what percentage of the global Gini coefficient was attributed to class differences within countries?

15 percent

What significant policy change did Quebec implement in 1997 to affect the female labour force participation rate?

Government subsidized child care

According to OECD data, for which specific group of women is the gender earnings gap especially severe?

Working mothers (those with at least one child)

What was the trend for the percentage of the Canadian labour force under age 25 between 1974 and 2019?

it fell as the birth rate declined

Which group in Canada generally experiences the largest proportionate earnings gap compared to others according to Pendakur and Pendakur?

Aboriginal Males

According to Statistics Canada data for 2018, which decile of the population earned 26.2% of the total income?

Highest decile

According to the Piketty-Saez data, wealth inequality is consistently _____ than income inequality.

higher