Econ 230 mid term 2
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Area between Lorenz Curve and and Line of equality. Shaded area divided by triangle. Larger number, means highly unequal.
Graph depicting the variance of the size distribution of income from perfect equality.
Kuznets' inverted U hypothesis
inequality will worsen and then improve as a country grows.
Modern Sector Enlargement
- Inequality would first rise and then fall
- The lorenz curves will cross, cannot make unambiguous statement about change in relative inequality, may worsen or improve.
- Happening in China, Taiwan, Korea
Modern Sector Enrichment
- Inequality will steadily rise
- economy grows but growth is limited to a fixed number of people, workers and wages held the same.
- no change in povery, lorentz curve shifts downward
- happening in Latin America and Africa
Traditional Sector Enrichment
- Inequality will steadily fall
- Lorentz curve shifts in
- growth in traditional sector, none in modern
- Low income low growth
- Like in Sri Lanka and India
Percentage of a Country's total consumption necessary to bring everyone in the country below the poverty line up to the line.
Functional Distribution of income
The distribution of income to factors of production without regard to the ownership of the factors.
Malthusian population trap
- Resources grow arithmetic rate
- Population grew at geometric rate
- ignore technological advancement
- does not stand up to modern empirical testing
- completely macro approach ignoring micro decisions and circumstances
The boost in grain production associated with scientific discovery of new hybrid seed varieties of wheat, rice, and corn. Resulting in higher yields in many developing countries.
- Mostly subsistence farming
- problems include:
- Small amounts of cultivatable land by families
- Shifting cultivation taps out land
- Labor is scarce during harvest, because its so big due to only one rain season.
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