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macro / ch 12

12.1Inequality

2 min read · 4 sections

The relationship between equity and equality

  • equity
    • fairness distribution
    • Equity refers to fairness in the distribution of income, wealth, or resources.
  • equality
    • the idea of being the same
    • Equality refers to an equal distribution of income, wealth, or resources.

Economic inequality

  • The meaning of economic inequality
    • refers to the degrees that people in a population differ in their ability to satisfy their economic needs.
    • focus on inequalities caused mainly by differences in income and wealth
    • Unequal distribution of income
      • income inequality arises from differences in how evenly income is distributed in a population.
    • Unequal distribution of wealth
      • wealth inequality arises from differences in the amount of wealth people own.
      • refers to the money or things of monetary value including savings, stocks, land, and more.
  • Income inequality refers to the unequal distribution of income among individuals or households in an economy.
    • wages + salaries + rent + interest + profit + transfers
  • Wealth inequality is the unequal distribution of the value of assets owned by individuals or households, after subtracting their liabilities.
    • Wealth 是你已经拥有和积累下来的东西，不是今年赚了多少

The Gini coefficient

  • (area between diagonal and Lorenz curve)/(entire area under diagonal)
  • it is a summary measure of income inequality

Wealth inequality

  • the distribution of wealth is generally far more unequal than the distribution of income in most countries in the world.
  • Reasons behind greater wealth inequality
    • Limited growth in wages makes it difficult for low-income and middle-income people to save and accumulate wealth.
    • High-income people tend to consume a smaller fraction of their income than lower-income people therefore have greater possibilities of saving and accumulating growth
    • The greater the income, the more possibilities for accumulating wealth, but many types of wealth (stocks, bonds, real estate) lead to even more income and hence more possibilities for accumulating more wealth