Essay on Strategies Of Economics Development
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Added on 2020-01-28
Essay on Strategies Of Economics Development
Added on 2020-01-28
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STRATEGIES OFECONOMICSDEVELOPMENT
ESSAY ''To combat poverty and increase growth in the world's poorest countries policy makers needto focus on decreasing world income inequality''Poverty refers to the situation of scarcity of funds or money to live a better life.Overpopulation, social inequality, unstable political situation, discrimination, high level ofnation debts and natural disaster are its causes. It impacts economic development in anadverse manner as increasing the poverty results in lowering the income levels of the citizens.Thus, poor people are not able to meet their basic needs such as food, cloth and shelter. Largenumber of people are living scarcely due to lack of funds. Nowadays, income inequality is the reason for increasing poverty. Therefore, it isvery necessary for the country to decrease poverty and make economic growth., . Therefore,policy makers need to focus on decrease in income inequality. The present essay will identifythe policies available for making economic development through reducing incomeinequalities. Agree or disagree with the statement: In current economic situation,povertyreduction is one of the major goals of the countries. Reduction in income inequality plays asignificant role in it, as a major cause of poverty. In present era, a large number of people aresuffering from extreme poverty due to low income level (Perkins and et. al., 2012). Povertycan be measured through detecting the percentage of population who are spending their livesbelow specified consumption standards. Income inequality: Increase in income disparity is a major challenge faced bygovernment of different countries. It refers to the salary gap between rich and poor citizens(Matthews, 2012). Unequal distribution of pay among the population is known as incomeinequality. It is arising at an exponential rate in emerging markets and developing countries(EMDCs). In UK, Organization for commercial and economic development (OECD) found that10% of the richest person’s income are almost 10 times greater than 10% of poor person. Invalue terms, the average of 10% of the deprived class pay is 8468£ comparatively very lowerthan average of 10% earning of the privileged class, amounted to 79042£. Moreover, thedifference between original and net income is also very high in UK. 10% of underprivilegedclass’s original salary is 3738£ while top richest 10% people have an actual pay of 102366£.Hence, it is approximately 27 times greater. Thus, it can be said that income is distributed inan uneven manner among the UK population. Further, imbalanced spread of earning across1 | P a g e
the regions also results in enlarging poverty. In context to UK, London is having higherincome as compare to North east. In addition to it, wealth distribution is also unequal as onlythe 10% of the richest society have more than 45% of wealth contribution. On the basis ofabove, it can be said that income disparity is a great reason for increasing poverty and itaffects economic growth in a negative direction. Thus, by eliminating or reducing the unevenpay distribution, UK will be able to combat poverty consequences. Another, impact ofincome inequality is reducing economic growth. It is because savings are greatly dependedupon the earning level hence, lower the income lead to lesser savings and vice versa results inlowering the economic development (Leigh and Blakely, 2013). Further, providing incentiveson the basis of skills also results in income differentiation and increase inequality.and affectgrowth adversely. Moreover, high lending rates than interest will impact country's growthnegatively. Higher wage payment to skilled employees than unskilled turn out to enhancedisparity and distract economic development. Henceforth, I am completely agree with the statement that to combat poverty andincrease growth is the necessary requirement of the countries. In order to reduce the poverty,policy makers need to focus on decreasing world income inequality. Rise in the income ofpoor persons help to reduce poverty. Measurement of income inequality: Measuring the income distribution helps todetermine the level of earning disparity in a great manner. For instance, two economy A andB having income structure of {50, 50} and {0, 100} than it can be said that economy B hashigh level of inequality. According to Anonymity principle, income inequality measuredissimilarity in the income distribution in society. It can be represented as {y1, y2,y3,......yn) in which y1<y2<y3......<yn. For instance, y1 income is 100, y2 is 200 and y3 is300 then it can be said that pay is distributed in an unequal manner hence, represent as{300<200<100}. Thus, it became clear that this principle indicate that one person have higherincome than other persons in the society. Population principle measures the proportion of two resident earning which arehaving different income levels(Hanley and Douglass, 2014). The principle says thatcomparing the salary distribution of n population with the population of 2n people having thesame income pattern hence, there is no difference existed in disparity between the paydistributions of both the population. It can be represented as {100, 200, and 300} = {100,100, 200, 200, 300, and 300}. Relative income principle says that income distribution is not unequal in the situationwhere the pays are {100, 200, and 300} and {200, 400, 600}. The reason behind the decisions2 | P a g e
is that inequality should not be measure in absolute terms. It is a relative term hence, incomevariations in {100, 200, 300} is same as to the earning inequalities in {200, 400, 600}. Dalton principle measure discrimination through transfer the money of poor people torich. For instance, measuring inequality between income distribution of {100, 200, 300} and{90, 200, 310}. Transfer of funds from poor to rich people is known as regressive transferindicates higher variation. Lorenz curve: It helps to measure inequality level of income distribution. Accordingto the curve, dissimilarity can be measured through plotting economy's earning distributionon a graph (Lewis, 2013). The curve says that perfect equality is existed at 45º line whilemoving further away with the curve line from the level of 45º will indicate inequality. Thediagram is presented here: According to the curve, if Lorenz consistent is below than the level of 45% for all thepay levels then it indicates that income is distributed in an uneven manner (Herndon, Ash andPollin, 2014). Henceforth, the curve can be applied for all the anonymity, population, relativeproceeds and Dalton principle. Moreover, comparison between two curves also provide betterunderstanding of inequalities.3 | P a g e
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