Year 13 Economics: Equity and Equality in Development Economics

Course Overview and Learning Objectives

• Institutional Context: These notes are based on the Year $13$ Economics curriculum at St Joseph's Secondary School.
• Subject Area: Strand EC13.5 Development Economics.
• Sub-Strand focus: EC13.5.2 Equity and Efficiency.
• Temporal Scope: Week $6$, Lesson $1$.
• Primary Learning Outcomes:
  • To provide a comprehensive definition of Equity.
  • To provide a comprehensive definition of Equality.

The Concept of Economic Equity

• The Central Goal of Fairness: Economic equity is a goal centered primarily on fairness. It is inherently subjective, as it is achieved based on people's beliefs regarding what is right or wrong.
• Redistribution of Income: Issues involving economic equity almost certainly deal with the redistribution of income within an economy.
• Broad Definition: In economics, equity is defined as the process of being fair in the economy. This ranges from the implementation of taxation concepts to the provision of welfare. It specifically addresses how income and opportunities are distributed among the populace.
• Fairness vs. Justice: Equity essentially means ensuring fairness or justice within a particular situation, taking into account the unique circumstances of the individuals involved.

The Concept of Economic Equality

• Definition of Sameness: Equality means "same" or "everyone." Under equality, no individual receives more than another; every person receives an identical, same-sized share.
• Promoting Fairness through Sameness: Equality promotes fairness by providing everyone with the exact same resources or rewards.
• The Prerequisite for Equality: The transcript notes that equality can only function effectively if everyone starts from the same place (e.g., in a metaphorical sense, everyone must be the same "height").

Comparative Analysis: Equity vs. Equality

• Equality as Sameness:
  • Focuses on giving everyone the same thing.
  • Ignoories personal circumstances.
  • Example: If a nurse and a carpenter both earn the exact same amount of money in a year, they have achieved equality of income.
• Equity as Fairness:
  • Focuses on making sure people get access to the same opportunities.
  • Acknowledges that differences or historical factors can create barriers to participation.
  • Sequence of Implementation: Society must ensure equity first before it can truly enjoy equality.
  • Example: A doctor may earn $3$ times as much as a nurse. While this is mathematically unequal, it may be considered equitable (fair) once individual circumstances, training, and responsibilities are taken into consideration.

Types of Equity

Equity in economic theory is often categorized into two distinct types:

• Horizontal Equity:
  • Requirement: This principle requires that people in similar situations be treated in a similar manner.
  • Taxation Example: In the context of taxes, horizontal equity means that individuals with the same levels of income should pay the same amount of tax.
• Vertical Equity:
  • Requirement: This principle requires that people in different situations be treated differently, according to what society deems as fair.
  • Taxation Example: A progressive tax system reflects vertical equity by taxing higher-income earners at a greater rate ($x\%$) than lower-income earners ($y\%$), where $x > y$.

Academic References and Sources

• Primary Source: Ministry of Education Advanced Economics Year $13$ ($2018$). Ministry of Education.
• Secondary Source: Investopedia ($2018$). "Equity." Retrievable via the Investopedia terms database.