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Tok presentation Julian carl

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Tok presentation Julian carl

  1. 1. INCOME INEQUALITY
  2. 2. INCOME INEQUALITY Krass & Kainz
  3. 3. WE ARE NOT DEBATING COMMUNISM VS CAPITALISM
  4. 4. AssumptionGENERALLY PEOPLE ARE HAPPIER THE HIGHER THEIR INCOMES ARE
  5. 5. AssumptionALL NATIONS STRIVE TO ACHIEVE THE FOUR MACROECONOMICS OBJECTIVES: SUSTAINABLE ECONOMIC GROWTH LOW INFLATION EQUAL INCOME DISTRIBUTION FULL EMPLOYMENT
  6. 6. Knowledge IssueDO HIGH LEVELS OF INCOME INEQUALITY COME AS A BYPRODUCT OF ECONOMIC GROWTH?
  7. 7. Knowledge ClaimYES, INEQUALITY COMES AS A BYPRODUCT OF ECONOMIC GROWTH.
  8. 8. INTRODUCTION TO INCOME INEQUALITY• Income inequality is when the incomes earned in a nation are not proportionally equal• In communist / socialist oriented economies, the incomes are distributed equally and not by measure of work input
  9. 9. WAYS FOR GOVERNMENT TO CHANGE INCOME INEQUALITY• Progressive vs Regressive income taxes• Flat taxes (ex. VAT)• Transfer payments
  10. 10. THE GINI COEFFICIENT• “A numerical measure of the level of income inequality in a nation. Measures the ratio of the area between the line of equality (the 45 degree line) and a nation’s Lorenz Curve to the total area below the line of equality. The closer the coefficient is to one, the more unequal a nation’s income distribution. The closer to zero, the more equal the nation’s income is distributed.” - Welkers Wikinomics
  11. 11. ARGUMENTS FOR INCOME INEQUALITY• Meritocracy (incentives to work)• No government intervention in wages (all G Intervention leads to a DWL)• Innovation should be rewarded• Investment (opportunity cost & risk) should be rewarded• More disposable income and more wealth leads to an incentive to create jobs through investment
  12. 12. ARGUMENTS AGAINST INCOME INEQUALITY• Diminishing Marginal Utility of Income• Social friction• Less Equity
  13. 13. INCOME INEQUALITY IN THE REAL WORLD
  14. 14. AN AUDITORY REPRESENTATION OF THE US INCOME GAP
  15. 15. AN AUDITORY REPRESENTATION OF THE US INCOME GAP
  16. 16. GINI INDEX VS GDP PER CAPITA (PPP)
  17. 17. CASE STUDY: UNITED STATES• Key Figures• 480kprivate boats, 223k private planes vs. 44 million people dependent on food stamps• 35k of 84k UHNWI live in US• Jon Paulson earned salary of all 80k NY public teachers together for the next three years in one year• Gini Coefficient 45
  18. 18. CASE STUDY: UNITED STATES• Social frication • 1% vs 99% • Occupy Wall Street • 44 million people dependent on food stamps
  19. 19. CASE STUDY: INCOME INEQUALITY AFTER THE FALL OF THE IRON CURTAIN• Iron Curtain fell in 1991 - following the end of the Cold War• Was set up as a ideological barrier between Western and Eastern Europe• In Eastern Europe - Communism• In Western Europe - Free Market Economies• Before fall of Iron Curtain: Low GDP (PPP) per Capita & Low Gini• After fall of Iron Curtain: Increasing GDP (PPP) per Capita & Higher Gini
  20. 20. % OF INCOMES EARNED BY HIGHEST 20% OF POPULATION
  21. 21. % OF INCOMES EARNED BY HIGHEST 20% OF POPULATION
  22. 22. GINI INDEX
  23. 23. GINI INDEX
  24. 24. GDP (PPP) PER CAPITA
  25. 25. GDP (PPP) PER CAPITA
  26. 26. GINI INDEX VS GDP (PPP) PER CAPITA
  27. 27. GINI INDEX VS GDP (PPP) PER CAPITA
  28. 28. CASE STUDY IRON CURTAIN CONCLUSION• Gini Index increases (more inequality)• Resulting in overall increase in income per person (PPP)• Higher percentage of total income earned by top 20%
  29. 29. So far we can conclude that: KEY CONCEPT THERE IS A TRADEOFF BETWEENNATIONAL INCOME AND EQUALITY
  30. 30. CASE STUDY: JAPAN & SWEDEN
  31. 31. Brazil Japan Sweden
  32. 32. CASE STUDY: JAPAN & SWEDEN DIFFERENT APPROACHES• Japan • Comparably low income taxes (up to 35%) • Legislature to minimize CEO to Worker pay ration (16:1) • Various legislature to reduce incomes pre tax• Sweden • Highly progressive income tax system (up to 65%) • Generous transfer payments • Benefit schemes
  33. 33. Now we are confused... KEY CONCEPTTHERE IS NO TRADEOFF BETWEENNATIONAL INCOME AND EQUALITY
  34. 34. Knowledge ClaimINEQUALITY COMES AS A BYPRODUCT OF ECONOMIC GROWTH.
  35. 35. CONCLUSION• Presented evidence to confirm and refute our KC• No distinguishable relationship (too many factors determining economic success or failure)• Government play a key role in redistributing income
  36. 36. FINAL THOUGHTS• Income inequality is not an issue as long as: • No absolute poverty exists (only relative poverty) • Income inequality arises due to merit and not due to unequal opportunity • Income gaps are not forever increasing
  37. 37. Freeland, Chrystia. Plutocrats: The Rise of the New Global Super-rich and the Fall of Everyone Else. New York: Penguin, 2012. Print.Maley, Welker Sean, Jason. Economics: Developed Specifically for the IB DIPLOMA. N.p.: n.p., n.d. Print.Skidelsky, Robert, and Edward Skidelsky. How Much Is Enough?: Money and the Good Life. New York: Other, 2012. Print.Stiglitz, Joseph E. The Price of Inequality: [how Todays Divided Society Endangers Our Future]. New York: W.W. Norton &, 2012. Print.http://www.google.com/publicdata/directoryhttp://www.npr.org/blogs/money/2011/03/09/134370052/the-tuesday-podcast-money-buys-happinesshttp://www.npr.org/2011/10/29/141823761/the-income-gap-explained-with-candy-cornhttp://www.economist.com/blogs/graphicdetail/2012/05/ratio-ceo-worker-compensationhttp://thinkprogress.org/politics/2010/07/08/106536/japanese-ceo-american-sixth/?mobile=nc

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