Economic Disparity

Topics: Economic inequality, Lorenz curve, Gini coefficient Pages: 3 (1110 words) Published: November 7, 2013
Economic disparity, also known as income inequality, comprises all the inequalities in distribution of assets and income. Some economists affirm that the gap between rich and poor is the result of a well-functioning economy. In addition, studies have considered inequality something necessary and beneficial (Garret). Nevertheless, equality has shown to promote consumer spending and prosperity (Inequality: Recent Trends in China). However, governments cannot seem to decide on the morality and utility of this issue. Economic disparity varies between societies, structures, systems, situations and individual ability (Berg and Ostry).  Recent studies have shown that “the average income of the richest 10% of the population is about nine times that of the poorest 10% across the Organization for Economic Cooperation and Development, up from seven times 25 years ago" (Gurria). This shocking numbers left countries wondering why wealth and income are so unequal. With countries such as Brazil, challenged by this issue, the only alternative is to rely on the support and resources the government can offer. Measuring Methods Inequality can be calculated with different numerical indices. The Gini-coefficient is the most commonly used method of measuring. As explained by the World Bank, the coefficient varies between 0, which reflects complete equality, and 1, which indicates complete inequality. Graphically, the Gini coefficient can be easily represented by the area between the Lorenz curve and the line of equality. Causes for Inequality There are many causes for economic inequality within societies. The factors that affect disparity the most are: market economies, and access to education. Market economies became a major cause of economic inequality, since wages are determined by the market. Even stable markets can lead to high inequality. The economic model of supply and demand for different jobs plays an important role in this issue. A job in which there is high supply, meaning...
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