Summary
Chapter 8 summary
- Course
- Institution
Summary of 10 pages for the course EKN 310 at UP (Chapter 8 summary)
[Show more]
Seller
Followgeorgiataylor
Content preview
Chapter 8Government intervention to reduce inequality and poverty
Inequality and poverty in SADC countries:
Measures to quantify inequality and poverty:
1. Poverty rates → % of the population living below the “poverty line” → US$ 3.20 per
person per day (International poverty line determined by the World bank in 2018).
2. Gini coefficient → measure of income distribution → deviation of actual income
distribution in a country from the line of absolute equality
- 0 > GC < 1 → closer to 1 = more unequal income distribution
- 0 = perfect equality → Lorenz curve is the same as the actual distribution.
- 1 = perfect inequality → all income goes to one member of the population.
Poverty Income inequality
Country (Year) Rates Gini Income shares
(<$3.20 p.d) Coefficient Poorest 20% Richest 20%
Angola (2008) 55,7 0,427 5,4 48,5
Botswana (2009) 37,1 0,605 2,8 65,0
Congo (DRC) 2012) 91,3 0,421 5,5 48,4
Eswatini (2009) 64,4 0,515 4,0 56,7
Lesotho (2010) 78,1 0,542 2,8 58,2
Madagascar (2012) 91,1 0,426 5,7 49,4
Malawi (2010) 88,8 0,455 5,5 51,8
Mauritius (2012) 3,2 0,358 7,4 43,9
Mozambique (2014) 81,9 0,540 4,2 59,5
Namibia (2009) 47,0 0,611 3,3 66,4
Seychelles (2013) 2,5 0,468 5,4 53,0
South Africa (2014) 37,6 0,630 2,4 68,2
Tanzania (2015) 79,0 0,378 7,4 45,8
Zambia (2015) 74,3 0,571 2,9 61,3
Zimbabwe (2011) 47,2 0,432 5,8 49,7
- Table analysis:
o Poverty is spread across all SADC countries (except Seychelles and
Mauritius)
o In Mozambique → population is equally poor → moderate GC
o In SA → income spread is more significant → high GC
▪ Poverty rate (37,6%) is high for a middle-income country in
comparison to other middle-income countries (Brazil (8,0%);
Colombia (11,8%) and Indonesia 30,9%).
- Gini coefficient income shares per income quintile for SA:
o Quintile 1 (lowest) = 2,4%
o Quintile 2 = 4,8%
o Quintile 3 = 8,2%
o Quintile 4 = 16,5%
o Quintile 5 (highest) = 68,2%
o NOTE! Lowest 40% of the population only earn 7.2% of SA’s total income.
o
Notes by Georgia Taylor EKN 310 1
, o GC is derived from the Lorenz curve → shows cumulative income shares
of cumulative fractions of the population.
o GC is the measure of the extent to which actual income
distribution deviates from the Lorenz curve.
o Calculation method using the graph: area A/(area A + area B)
100
Cumulative share of income
100
A
B
0 100
Cumulative share of pop.
Budget redistribution and poverty alleviation:
Fiscal policy tools used to reduce poverty and inequality:
- Include taxes, government expenditure programmes and regulation.
- Short term → national budget an important instrument to influence distribution of
private earnings.
- Long term → (indirect effects of fiscal system) → government spending and taxes
influence economic growth rates, investment in physical and human capital
(major determinants of distribution of earnings from capital and labour activity)
o Government needs to effect structural changes to influence economic
output and growth → big challenge = design a system to help the poor
and empower people to lift themselves out of poverty (human capital
investment)
Distinctions in income:
- Primary income (Yp) → personal income of individual, household or group
reflecting the actual income received in cash or in kind.
o Gross income (income before tax)
o Disposable income
- Secondary income (Ys): Primary income – direct taxes paid from Yp (disposable
income) + value of government services consumed.
o Income after government intervention.
𝑌𝑠 = 𝑌𝑝 – 𝑇𝑑 + 𝐺
Td = direct taxes G = government expenditure
- Two policy approaches will be examined to change Yp and Ys through
government intervention.
Notes by Georgia Taylor EKN 310 2
The benefits of buying summaries with Stuvia:
Guaranteed quality through customer reviews
Stuvia customers have reviewed more than 700,000 summaries. This how you know that you are buying the best documents.
Quick and easy check-out
You can quickly pay through credit card or Stuvia-credit for the summaries. There is no membership needed.
Focus on what matters
Your fellow students write the study notes themselves, which is why the documents are always reliable and up-to-date. This ensures you quickly get to the core!
Frequently asked questions
What do I get when I buy this document?
You get a PDF, available immediately after your purchase. The purchased document is accessible anytime, anywhere and indefinitely through your profile.
Satisfaction guarantee: how does it work?
Our satisfaction guarantee ensures that you always find a study document that suits you well. You fill out a form, and our customer service team takes care of the rest.
Who am I buying these notes from?
Stuvia is a marketplace, so you are not buying this document from us, but from seller georgiataylor. Stuvia facilitates payment to the seller.
Will I be stuck with a subscription?
No, you only buy these notes for $2.84. You're not tied to anything after your purchase.
Can Stuvia be trusted?
4.6 stars on Google & Trustpilot (+1000 reviews)
73918 documents were sold in the last 30 days
Founded in 2010, the go-to place to buy study notes for 14 years now