ECON 455 Lecture 9 Inequality and Poverty

ECON 455 Lecture 9 Inequality and Poverty - Econ455:...

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1 1 Econ455: Economic Development in China Lecture 9: February 7 Inequality and Poverty Sandra Poncet Lorch Hall, room 207 Email: sponcet@umich.edu Office Hours: 2 Introduction Features of the distribution of income within a country Dudley Seers' (1969) definition of development: Development occurs with the reduction and elimination of poverty, inequality and unemployment within a growing economy. Inequality Relates to the distribution of income/wealth across a population 2 dimensions: Inequality of outcomes vs of opportunities Predetermined circumstances —such as gender, race, family background, or country of birth—as markers for unequal opportunities. Determine much more than just future earnings . Has impact on education and health, thus affecting the capacity of individuals to engage in economic, social, and political life.
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2 3 Lecture Outline Introduction I-Inequality, why should we care? A-Intrinsic features B-Functional features (effect on development) C-Growth and equity as compatible objectives II-China’s Increase in Inequality A-Inequality in China: level, evolution B-Dimensions: -regional inequality -urban-rural divide -urban inequality -rural inequality 4 I-Inequality, why should we care? A-Intrinsic reasons for caring about inequality of opportunities and unfair processes 1-Violation of a sense of fairness 2-Consistent with most moral and religious teachings 3-Coherent with experimental evidence (philosopher John Rawls) uncertainty called the "veil of ignorance."
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3 5 B-Functional features (effect on development) Three stylized facts to start with 1-Greater poverty reduction can be expected with economic growth if inequality is low: different leverage effect 2-Rich elites are known to spend much of their incomes on imported luxury goods (capital flight) 3-Aspirations, savings and inequality: saving rate depends on the level of income 6 I-Inequality, why should we care? B-Functional features (effect on development)
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This note was uploaded on 03/07/2008 for the course ECON 455 taught by Professor Poncetsandra during the Winter '06 term at University of Michigan.

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ECON 455 Lecture 9 Inequality and Poverty - Econ455:...

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