This document discusses the relationship between economic equality and efficiency. It notes that while some inequality is necessary for market functioning, greater equality is associated with longer periods of economic growth. Countries with more unequal income distributions tend to experience more volatile growth that is less sustainable. There is no clear trade-off between equality and growth - equality can actually promote more robust, sustained growth over the long run.

1. In the name of ALLAH who is theIn the name of ALLAH who is the
most Beneficent and the Merciful.most Beneficent and the Merciful.

2. Prepared by:
Usman Sarwar (2443-SE/BSECO/F14)

3. 1. Economic Equality
2. Economic Efficiency
3. People Face Trade Offs
4. Life Example
5. What is Equality Efficiency Trade-off ?
6. Is there a trade off ?
7. Equality Vs Inequality
8. Income Distribution and Growth Sustainability
9. Economic Effects of Inequality
10. Advanced economies have steady growth
11. It’s a roller coaster for some
12. Lasting Effects
13. Factors effecting growth spells
14. No trade-off exists

4. It refers to equal life chances to provide all citizens with equal
minimum of income, goods, and services
It looks at the distribution of capital, goods and access to services
throughout an economy
An important ingredient in promoting and sustaining growth

5. An economic state in which every resource is optimally allocated to
serve each individual or entity in the best way
It relates how well a market or economy allocate scarce resources to
satisfy unlimited wants

6. Trade off is a situation that involve losing one quality or aspect of
something in return for gaining another quality and aspect

7. A student faces a trade off between studying for exam or to watch a
much awaited movie.

8. An equity-efficiency trade off exists whenever activity in a given
market may simultaneously increase productive efficiency and
decrease distributive equality, or vice versa.

9. Many economists believe that there is trade-off between equality and
economic growth.
Then why do governments try to reduce it?
The answer is a simple one: Because there is NO trade-off
Every government would want wage gap and inequality if it was
good.

10. Inequality gives a sudden boost
But equality is much better
The growth through it might be slow but is sustainable

11. Some inequality is essential to the effective functioning of a market
economy
Longer growth spells are robustly associated with more equality
Increased inequality may shorten growth duration

12. Social unrest and civil disobedience
Limited access to health care and education
Volatile incomes, high debts
Capital investments skewed towards preferences of the rich

13. • Countries in the chart
• United Kingdom
• United States
• Both have a graph that is
going uphill smoothly
• There are no sudden drops

14. • Four countries in the chart
• Brazil and Chile have a
smooth ride
• For Cameroon and Jordan
it’s a roller coaster

15. •The graph has years in
growth spells on y-axis and
inequality on x-axis
•Clearly it can be seen when
inequality is low growth spell
lasts longer
•And the more the inequality,
the less sustainable is growth

16. Factors include :
•Political Institution
•Trade Openness
•Exchange rate
competitiveness
•External Debt
•Foreign direct investment
•Most important factor is
Income distribution

17.  Inequality might give a sudden boost but it can also create a
economic boom similar to 1930s and 2008
 Growth this way is not sustainable
 Equality is better in the long run
 Growth through equality is sustainable
 And it actually increases economic growth by a fair margin
 Therefore there is no trade-off between inequality and efiiciency

18. ‘‘..the conflict between equality and economic
efficiency is inescapable.’’
-Arthur Okun (1975)