Saturday, May 23, 2015

Three facts about inequality

In the typical sequence of an undergraduate Public Economics course, after talking about efficiency and markets, there is a chapter about income distribution. This is the place where I try to convince my students that inequality is an important topic, as important or more than efficiency. To motivate the topic and the students’ interest in authors such as Piketty, Bowles, Deaton or Stiglitz, I mentioned in class the other day three facts from the book by Branko Milanovic, “the Haves and the Have-nots:”
-80% of income variation is explained by country of birth and by family of origin. The rest is not all effort, as it includes gender, race and other factors related to luck.
-Most probably, all those in the classroom (students and lecturer of a Spanish public university) including myself belong to the richest 5% in the Planet.
-The richest 10% in the world is on average 80 times richer than the poorest 10%.
It seems to me that it is useful to remind students of the basic facts of the world we are in.

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