Inequality

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Inequality in economics is the measurement of the allocation of scarce resources among a population. Inequality is measured by comparing the resources of citizens both relatively and against the quantity of total resources available.

Contents

Measurement

The Gini coefficient is one method of measuring inequality within a population. The advantage of the Gini is its simplicity in summarizing statistical data. Possible Gini scores range from 0 - 1. The higher the coefficient, the more inequality there is in a given set.

Gini coefficient, after taxes and transfers[1]

Gini coefficient, after taxes and transfers [2]








Country mid-70s mid-80s around 1990 mid-90s around 2000 mid-2000s Late 2000s
Australia 0.309 0.317 0.315 0.336
Austria 0.236 0.238 0.252 0.265 0.261
Belgium 0.274 0.287 0.289 0.271 0.259
Canada 0.304 0.293 0.287 0.289 0.318 0.317 0.324
Chile 0.527 0.503 0.494
Czech Republic 0.232 0.257 0.260 0.268 0.256
Denmark 0.221 0.226 0.215 0.226 0.232 0.248
Estonia 0.349 0.315
Finland 0.235 0.209 0.218 0.247 0.254 0.259
France 0.300 0.290 0.277 0.287 0.288 0.293
Germany 0.251 0.256 0.266 0.264 0.285 0.295
Greece 0.413 0.336 0.336 0.345 0.321 0.307
Hungary 0.273 0.294 0.293 0.291 0.272
Iceland 0.257 0.301
Ireland 0.331 0.324 0.304 0.314 0.293
Israel 0.326 0.329 0.338 0.347 0.378 0.371
Italy 0.309 0.297 0.348 0.343 0.352 0.337
Japan 0.304 0.323 0.337 0.321 0.329
South Korea 0.306 0.315
Luxembourg 0.247 0.259 0.261 0.258 0.288
Mexico 0.452 0.519 0.507 0.474 0.476
Netherlands 0.263 0.272 0.292 0.297 0.292 0.284 0.294
New Zealand 0.271 0.318 0.335 0.339 0.335 0.330
Norway 0.222 0.243 0.261 0.276 0.250
Poland 0.316 0.349 0.305
Portugal 0.354 0.329 0.359 0.356 0.385 0.353
Slovak Republic 0.268 0.257
Slovenia 0.246 0.236
Spain 0.371 0.337 0.343 0.342 0.319 0.317
Sweden 0.212 0.198 0.209 0.211 0.243 0.234 0.259
Switzerland 0.279 0.276 0.303
Turkey 0.434 0.490 0.430 0.409
United Kingdom 0.268 0.309 0.354 0.336 0.351 0.331 0.345
United States 0.316 0.337 0.348 0.361 0.357 0.380 0.378

Utilitarian Approach

  • The idea that a poor person gets more utility per dollar than a rich person does
  • Since the utility of every dollar for a rich person is lower compared to the poor person, it is believed that is the person with more money gives the dollar to someone who is less well off, total social welfare will increase. [3]

Rawlsian Approach

John Rawls described his theory on inequality in his book A Theory of Justice He believes society must be arranged so that the least advantaged in society should be helped and that offices and positions should be open to everyone on the condition of fair and equal opportunity.[4]

Rawls proposes a thought experiment whereby people are considered to be behind a "veil of ignorance," that doesn't allow them to see where they will end up in life or what types of characteristics they will have. We are to judge the equity of a nation by how well we would fare if we were the worst off person in the population. Putting ourselves behind the theoretical veil of ignorance forces us to look at the possibility of our future as the lowest person in society. The most equitable nation, according to this theory, is the nation where the worst off person fares the best in comparison to the worst of person in other nations.

References

  1. http://en.wikipedia.org/wiki/List_of_countries_by_income_equality
  2. stats.oecd.org
  3. http://www-rohan.sdsu.edu/dept/phil/tendequal.htm
  4. http://en.wikipedia.org/wiki/A_Theory_of_Justice
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