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econ notes 1

by: Mackenzie Pietro

econ notes 1 Econ 1000

Mackenzie Pietro
GPA 4.0

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Micro economics
Survey of Economics
Class Notes
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This 2 page Class Notes was uploaded by Mackenzie Pietro on Thursday August 11, 2016. The Class Notes belongs to Econ 1000 at Ohio University taught by in Fall 2016. Since its upload, it has received 5 views.


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Date Created: 08/11/16
ECN 202 Homework 3 Spring 2016 due Tuesday, March 8, 2016 Mackenzie Pietro Globalization and Inequality - I Read the article “Why globalisation may not reduce inequality in poor countries” from the  Economist and answer the following questions (10 points) 1. What does ‘Gini index of zero’ means?  A ‘Gini index of zero’ means the spoils are equally divided. 2. What is the comparative advantage?  The comparative advantage is that poor countries produce goods that require a mass amount of  unskilled workers, as global trade increases, unskilled workers are in high demand in poor  countries where as skilled workers in poor countries are less needed. Since more employers are  wanting these unskilled worker’s services their wage gets boosted and the skilled worker do not  get this benefit thus resulting in inequality falling.    3. How does theory of comparative advantage predict that inequality falls when  developing countries enter global markets?  Since more employers are wanting these unskilled worker’s services their wages get boosted and the skilled worker do not get this benefit thus resulting in inequality falling.  4. Within many developing economies, inequality actually has worsened. Briefly  describe in your own words the two theories explaining why.  The first theory emphasizes outsourcing, where rich countries shift parts of their production  process to poor countries. These companies usually hir4e skilled workers and pay high wages  than local firms. Often, these skilled workers can request even higher wages because they are  expected to keep productivity at a high to meet the deadline of an efficient rich­ world company. Unskilled workers in the poor countries typically don’t have the same opportunities and their  productivity doesn’t rise. The second theory is that those who have nothing have no opportunity  and stay at poverty level, while those who had a little bit of money to start out with can gain  from investment and benefit from growth. Inequality would only fall with economic  development and demands for redistribution.   Read For richer, for poorer, one of the related articles in the deeper section and answer the  questions below (5 points).   1. By how much has the income of the top 0.01% families in the US increased since                   1980? What’s the percent increase in the income of the top 0.01% families since  1980? The income of the top 0.01% families in the US has quadrupled, from one to five percent since  1980. 2. What were America’s Gini for disposable income in 1980 and 2010?  In 1980, America’s Gini for disposable income was 0.3 and in 2010 was 0.39. 3. What does ‘From U to N’ mean?  In 1955, Kuznets described the relationship between inequality and prosperity as an upside­  down U, where inequality rises when people leave the land in the early stages of  industrialization, where they earn more money in factories and are more productive. Once  industrialization is complete it declines again as redistribution from the government is demanded by better­ educated citizens. These days, the inverted U has turned into an italicized N, with the  final stroke pointing menacingly upwards. 4. What are the three arguments that this special report series will make?  The first argument is, a big driver of today’s income distribution is government policy although  the modern global economy is leading to wider gaps between the less and more educated. The  second argument is, bigger income gaps are more likely to reduce future prosperity and social  mobility reflected through market and government failures that reduce growth thus why a lot of  today’s inequality especially in the most unequal countries is inefficient. The third argument is,  to reduce income disparities there is a reform agenda. It is about attacking cronyism and  investing in the young in both the emerging and rich economies. This could be called a “True  Progressivism”. Submit a hard copy at the beginning of the class on Tuesday, March 8th.  


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