ECO 2117 Lecture Notes - Lecture 11: Headcount, Social Capital, Progressive Tax
20 Aug 2016
School
Department
Course
Professor
ECO2117
March 3 2016
Correlation Between Economic Growth and Inequality
-Kuznets’ inverted U hypothesis: as a developing country grows, income inequality first rises
and then falls
-if we take into account Latin American countries, the Kuznetsk curve fails
-there is mine evidence, where in some countries the pattern occurs whereas in others it does
not
-this discrepancy tells us we need to dig deeper to solve the relation between rising income
and inequality
-progress on extreme poverty:
-clear progress on $1.25/day headcount
-less clear progress on $2/day headcount
-incidence of extreme poverty is uneven
-there is an association between growth and poverty reduction
-China is a good example since a lot of people are stepping up out the poverty threshold
-lower extreme poverty mat lead to more growth
-poverty creates conditions int which poor people have no access to credit, which leads to
underinvestment
-not enough saving by the rich in poor countries leading to underinvestment (newly rich
people have tendencies to not invest in their own countries but to invest abroad instead)
-low levels of living lowers productivity raising living standards of poor people increases
demand for goods and services (since they are now able to afford them)
-at what point are these newly rich people going to ask for more influence at the public
decision making/political level? (what is happening in China)
-large poverty reductions can raise material and psychological incentives to public
participation
-these people want to influence public policies
-the more people that participate in society, the better the society is
-networking is important
-conclusion of the correlation among growth, poverty, and inequality
! of !1 3
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Document Summary
Kuznets" inverted u hypothesis: as a developing country grows, income inequality rst rises and then falls. If we take into account latin american countries, the kuznetsk curve fails. There is mine evidence, where in some countries the pattern occurs whereas in others it does not. This discrepancy tells us we need to dig deeper to solve the relation between rising income and inequality. There is an association between growth and poverty reduction. China is a good example since a lot of people are stepping up out the poverty threshold. Lower extreme poverty mat lead to more growth. Poverty creates conditions int which poor people have no access to credit, which leads to underinvestment. Not enough saving by the rich in poor countries leading to underinvestment (newly rich people have tendencies to not invest in their own countries but to invest abroad instead)
