Lecture 3-1 Poverty and Inequality

Lecture 3-1 Poverty and Inequality - Lecture 3-1 Poverty...

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Lecture 3-1 Poverty and Inequality Instructor: Dr. Jin WANG Feb 18 th , 2011
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Poverty and Inequality ± Unlike poverty, which concentrates on the situation of those at the bottom of society, inequality shows how resources are distributed across the whole society. ± Inequality is vital when considering poverty, as the overall distribution of resources in a country affects the extent and depth of poverty.
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Inequality: a concept linked to wealth distribution
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Inequality: Wealth Distribution ± The simplest measurement of inequality sorts the population from the poorest to the richest ± and shows the percentage of expenditure (or income) attributable to each fifth (quintile) or tenth (decile) of the population. ± Let’s check the following example from Vietnam.
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An example on Wealth Distribution The 1 st fifth population claimed 8.4% of Vietnam’s total expenditure The 2nd fifth population claimed 12.3% of Vietnam’s total expenditure The 3rd fifth population claimed 16% of Vietnam’s total expenditure The 4 th fifth population claimed 21.8% of Vietnam’s total expenditure The final fifth population claimed 41.4% of Vietnam’s total expenditure Q: what do you think of Vietnam’s wealth distribution as a socialist country, very equal?
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Measuring Inequality: Parade of Dwarfs ± Assume that everyone in the population has height proportional to income. ± Line people up in order of height, and let them march. ± After some time, the shape of such a parade will be represented by the curve called Parade of Dwarfs (and a Few Giants).
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The Story of Parade of Dwarfs [Pen, 1971] ± The Dutch economist, Jan Pen, proposed visualizing the spread of incomes as an hour-long parade through a town, where the height of each individual corresponded to their income. ² The first 40 minutes or so would witness a parade of dwarves, ² After that, a fair people of average stature would pass by, and then a few more who were somewhat on the tall side ² In the last couple of minutes, great giants would emerge.
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Parade of Dwarfs (UK’s data) Source: Report by John Hills, LSE
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An Advanced Version of “Parade of Dwarfs”: Lorenz Curve ± What is Lorenz Curve?
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This note was uploaded on 02/14/2012 for the course ISOM isom111111 taught by Professor Hong during the Spring '11 term at HKUST.

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Lecture 3-1 Poverty and Inequality - Lecture 3-1 Poverty...

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