IB Econ Inequality

Fundamental Theory & Concepts

Core Theory Posts

What Is Economic Inequality? - Understanding the Basics Defining income and wealth inequality, understanding the difference between equity and equality, and why inequality matters for economic development.

Economic inequality | Income distribution | Wealth distribution | Equity vs equality | Factor endowments | Human capital

Types of Inequality - Income, Wealth, and Opportunity Breaking down the different forms of inequality and how they interact to create persistent economic disparities.

Income inequality | Wealth inequality | Opportunity inequality | Gender inequality | Regional inequality | Intergenerational mobility

Market Income vs Disposable Income - Pre and Post Government Understanding how government intervention transforms market income distribution through taxes and transfers.

Market income | Disposable income | Pre-tax inequality | Post-tax inequality | Transfer payments | Income redistribution

Absolute vs Relative Poverty - Different Measures, Different Solutions Distinguishing between absolute deprivation and relative disadvantage in measuring and addressing poverty.

Absolute poverty | Relative poverty | Poverty line | Basic needs | Social exclusion | Living standards

Measurement Tools

The Lorenz Curve - Visualising Inequality Mastering the construction and interpretation of Lorenz curves to analyze income distribution patterns.

Lorenz curve | Income distribution | Cumulative percentages | Perfect equality line | Graphical analysis | Distribution patterns

The Gini Coefficient - Quantifying Inequality Understanding how to calculate and interpret the Gini coefficient as a summary measure of inequality.

Gini coefficient | Inequality index | Mathematical calculation | International comparisons | Gini trends | Statistical measurement

Other Inequality Measures - Beyond Gini Exploring alternative measures including the Palma ratio, 90/10 ratio, and quintile analysis.

Palma ratio | 90/10 ratio | Quintile shares | Decile analysis | Top 1% share | Alternative metrics

Interpreting Inequality Data - Making Sense of Statistics How to analyze inequality data critically and understand what different measures reveal and conceal.

Data interpretation | Statistical analysis | Inequality trends | Cross-country comparisons | Time series | Data limitations

Causes of Inequality

Market Forces

Factor Markets and Inequality - Where It All Begins How differences in labor, capital, and land ownership create primary income inequalities.

Factor markets | Wage differentials | Capital ownership | Land distribution | Primary income | Market outcomes

Education and Human Capital - The Skills Premium The role of education in creating and perpetuating income differences through human capital formation.

Human capital | Education premium | Skills gap | Access to education | Returns to education | Knowledge economy

Technology and Automation - Winners and Losers How technological change creates new inequalities while potentially reducing others.

Technological change | Automation | Digital divide | Skill-biased change | Job polarization | Innovation benefits

Globalisation Effects - Trade, Migration, and Inequality The complex relationship between globalization and inequality within and between countries.

Globalisation | Trade effects | Labor mobility | Outsourcing | Global value chains | Winner and losers

Structural Factors

Market Power and Rent-Seeking - Inequality Through Monopoly How monopoly power and rent-seeking behavior concentrate wealth and income.

Market power | Monopoly rents | Rent-seeking | Barriers to entry | Economic rents | Wealth concentration

Discrimination - Gender, Race, and Other Barriers The role of discrimination in creating and maintaining inequality across different groups.

Gender discrimination | Racial inequality | Glass ceiling | Wage gaps | Employment discrimination | Social barriers

Inheritance and Intergenerational Wealth - Born Advantage How wealth transfers across generations perpetuate and amplify inequality.

Inheritance | Intergenerational wealth | Family advantages | Social mobility | Wealth dynasties | Opportunity hoarding

Financial System Inequality - Access and Returns How the financial system can both reduce and increase inequality through differential access and returns.

Financial inclusion | Credit access | Investment returns | Financial literacy | Banking discrimination | Asset ownership

Consequences of Inequality

Economic Impacts

Growth and Inequality - The Complex Relationship Analyzing how inequality affects economic growth through various channels and the growth-equity trade-off.

Economic growth | Growth-equity tradeoff | Investment effects | Consumption patterns | Productivity | Aggregate demand

Poverty and Social Exclusion - The Bottom Line How high inequality creates and perpetuates poverty and social exclusion.

Poverty | Social exclusion | Poverty traps | Basic needs | Social participation | Capability deprivation

Economic Instability - Inequality and Crises The link between high inequality and economic instability, including financial crises.

Economic instability | Financial crises | Asset bubbles | Debt accumulation | Systemic risk | Crisis transmission

Resource Allocation - Efficiency Costs of Inequality How extreme inequality leads to inefficient resource allocation and lost potential.

Resource allocation | Allocative efficiency | Human capital waste | Market failures | Opportunity cost | Economic potential

Social and Political Impacts

Social Cohesion - The Fabric of Society How inequality affects trust, social capital, and community cohesion.

Social cohesion | Social capital | Trust levels | Community bonds | Social fragmentation | Civic engagement

Political Inequality - Money and Power The relationship between economic inequality and political influence.

Political inequality | Campaign finance | Lobbying power | Policy capture | Democratic deficit | Elite influence

Health and Education Outcomes - Unequal Lives How inequality affects health, education, and overall quality of life.

Health inequality | Education access | Life expectancy | Infant mortality | Achievement gaps | Social determinants

Crime and Social Unrest - When Inequality Boils Over The connection between inequality, crime rates, and social instability.

Crime rates | Social unrest | Property crime | Violence | Social tensions | Political instability

Government Intervention Solutions

Progressive Taxation

Income Tax Progressivity - The Classic Tool How progressive income taxes redistribute income and the debates around optimal tax rates.

Progressive taxation | Tax brackets | Marginal rates | Average rates | Tax progressivity | Income redistribution

Wealth and Inheritance Taxes - Tackling Concentration The role of wealth, capital gains, and inheritance taxes in addressing wealth inequality.

Wealth tax | Inheritance tax | Capital gains tax | Property tax | Asset taxation | Wealth redistribution

Tax Avoidance and Evasion - The Enforcement Challenge How tax avoidance and evasion undermine progressive taxation and inequality reduction.

Tax avoidance | Tax evasion | Tax havens | Base erosion | Profit shifting | International cooperation

Optimal Tax Theory - Balancing Equity and Efficiency The economic theory behind designing tax systems that balance redistribution with growth.

Optimal taxation | Laffer curve | Deadweight loss | Tax efficiency | Behavioral responses | Tax design

Transfer Programs

Cash Transfers - Direct Redistribution Unconditional and conditional cash transfer programs and their effectiveness.

Cash transfers | Universal basic income | Conditional transfers | Social assistance | Poverty alleviation | Direct payments

In-Kind Benefits - Healthcare and Education How public provision of services reduces inequality through non-cash benefits.

In-kind transfers | Public healthcare | Free education | Housing assistance | Food programs | Service provision

Social Insurance - Protecting Against Risk How unemployment insurance, pensions, and other social insurance programs reduce inequality.

Social insurance | Unemployment benefits | Public pensions | Disability insurance | Risk pooling | Income security

Targeting vs Universality - Design Choices The trade-offs between targeted programs for the poor and universal benefits.

Means testing | Universal benefits | Targeting efficiency | Take-up rates | Stigma effects | Program design

Labour Market Policies

Minimum Wage - Raising the Floor The role of minimum wages in reducing inequality and the employment debate.

Minimum wage | Living wage | Wage floor | Employment effects | Monopsony power | Wage compression

Collective Bargaining - Worker Power How unions and collective bargaining affect wage distribution and inequality.

Trade unions | Collective bargaining | Union density | Wage premiums | Worker power | Industrial relations

Active Labor Market Policies - Skills and Jobs Training programs, job placement, and other policies to improve labor market outcomes.

Job training | Skills programs | Employment services | Apprenticeships | Labor activation | Workforce development

Anti-Discrimination Laws - Leveling the Field Legal frameworks to combat discrimination and promote equal opportunities.

Anti-discrimination | Equal pay | Employment equity | Affirmative action | Legal enforcement | Workplace equality

Real-World Applications & Case Studies

Current Global Inequality (2024-2025)

Post-Pandemic Inequality - The Great Divergence How COVID-19 affected global inequality patterns and the uneven recovery.

The global economy was projected to grow by 1.7% in 2023 and 2.7% in 2024, with developing countries facing particular challenges.

Pandemic effects | Unequal recovery | Wealth concentration | Digital divide | K-shaped recovery | Policy responses

Global Billionaire Boom - Extreme Wealth Concentration Total billionaire wealth increased by USD 2 trillion in 2024, highlighting extreme wealth concentration.

Billionaire wealth | Extreme inequality | Wealth concentration | Ultra-rich | Global wealth | Top 0.1%

Climate Inequality - Who Pays for Global Warming? The poorest 50 percent is responsible for just 12 percent of emissions but faces 75 percent of income losses.

Climate inequality | Carbon footprints | Climate damages | Environmental justice | Adaptation costs | Green transition

Digital Economy Inequality - New Forms of Disparity How the digital transformation creates new winners and losers in the global economy.

Digital inequality | Platform economy | Gig work | Tech wealth | Digital skills | Online access

UK-Specific Inequality Issues

UK Income Distribution - Among Europe's Most Unequal Analysing the UK's position as one of Europe's more unequal societies and recent trends.

UK inequality | Income distribution | Regional disparities | London effect | North-South divide | Brexit impacts

Housing Wealth Inequality - The Property Divide How UK house prices create and perpetuate wealth inequality across generations.

Housing inequality | Property wealth | Generation rent | Housing affordability | Wealth accumulation | Regional prices

Education and Social Mobility - Breaking Down Barriers The role of private schools, university access, and education policy in UK inequality.

Social mobility | Private education | University access | Grammar schools | Education inequality | Opportunity gaps

Benefits System and Poverty - The Safety Net Debate Analyzing Universal Credit, benefit cuts, and their impact on inequality and poverty.

Universal Credit | Benefit system | Welfare reform | Poverty rates | Benefit sanctions | Social safety net

Regional Comparisons

Nordic Model - Equality Through Universalism How Scandinavian countries achieve low inequality through comprehensive welfare states.

Nordic model | Universal welfare | High taxation | Social democracy | Equality outcomes | Policy lessons

US Inequality - The Outlier Among Rich Countries Why the United States has exceptionally high inequality among developed nations.

US inequality | Income concentration | Weak welfare | Market income | Policy choices | American exceptionalism

Latin American Patterns - Historical Legacy More than 80 percent of countries in Latin America have a Gini index above 40.

Latin American inequality | Colonial legacy | Land concentration | Informal sector | Conditional transfers | Regional patterns

East Asian Experience - Growth with Varying Equality How different East Asian countries managed the growth-inequality relationship.

East Asian model | Development strategies | Land reform | Education investment | Industrial policy | Inequality trends

Cross-Topic Connections

Inequality and Development

Development and Inequality - The Kuznets Debate Testing the Kuznets curve hypothesis and modern views on development and inequality.

Kuznets curve | Development patterns | Structural change | Middle income trap | Inclusive growth | Development paths

Poverty Traps and Inequality - Vicious Cycles How inequality creates poverty traps that prevent economic development.

Poverty traps | Vicious cycles | Capital constraints | Human capital | Credit access | Trap mechanisms

Inclusive Growth Strategies - Development for All Policies and approaches to ensure growth benefits all segments of society.

Inclusive growth | Pro-poor growth | Broad-based development | Shared prosperity | Growth strategies | Distribution focus

International Economics

Trade and Inequality - Globalisation's Double Edge How international trade affects inequality within and between countries.

Trade effects | Factor price equalization | Skill premiums | Trade adjustment | Comparative advantage | Distribution effects

Migration and Inequality - Movement and Distribution The complex effects of migration on inequality in sending and receiving countries.

Migration effects | Brain drain | Remittances | Labor markets | Wage impacts | Development effects

Global Tax Competition - Race to the Bottom? How tax competition between countries affects their ability to address inequality.

Tax competition | Capital mobility | Tax havens | Base erosion | International cooperation | Global governance

Macroeconomic Links

Inequality and Aggregate Demand - The Consumption Channel How inequality affects consumption patterns and aggregate demand.

Aggregate demand | Consumption function | Savings rates | Multiplier effects | Demand management | Fiscal policy

Monetary Policy and Inequality - Unintended Consequences How central bank policies can affect inequality through asset prices and employment.

Monetary policy | Asset prices | Quantitative easing | Interest rates | Wealth effects | Distribution impacts

Financial Crises and Inequality - Asymmetric Shocks How financial crises affect different income groups differently.

Financial crises | Crisis impacts | Bailouts | Unemployment | Asset losses | Recovery patterns

Current Statistics & Data (2024-2025)

Key Global Inequality Indicators

Income Inequality:

• The global average per capita income stood at €12,800 per year in 2023

• Top 10% global income share: 52%

• Bottom 50% global income share: 8.5%

• The richest 1 percent pocketed 20.6 percent of global income Global Inequality - Inequality.org

Wealth Concentration:

• 26 richest billionaires owned $2.872 trillion in wealth

• Top 1% wealth share globally: 47%

• 204 new billionaires created in 2024

Regional Inequality (Gini Coefficients):

• South Africa: 63 (world's highest)

• Brazil: 52

• United States: 41

• Slovakia: 24 (among world's lowest)

UK-Specific Inequality Data

• UK Gini coefficient: 0.35 (2024)

• Top 10% income share: 32%

• Top 1% income share: 13%

• Regional income gap: London average income 67% above UK average

• Wealth inequality: Richest 10% own 43% of wealth

• Child poverty rate: 4.3 million children (31%)

Gender Inequality Indicators

• Global gender pay gap: 16%

• Iceland tops gender equality index with score of 0.94

• Female labor force participation: 47% globally

• Women in senior management: 32% globally

IB Exam Excellence

Question Techniques

Evaluating Inequality Policies - Paper 1 Framework Comprehensive framework for analysing and evaluating government policies to reduce inequality.

IB Economics evaluation | Policy analysis | Paper 1 techniques | Evaluation framework | Policy effectiveness | Answer structure

Lorenz Curve and Gini Calculations - Paper 3 Skills Step-by-step guide to constructing Lorenz curves and calculating Gini coefficients.

Lorenz curve construction | Gini calculation | Paper 3 skills | Graphical analysis | Mathematical methods | Exam technique

Linking Inequality to Development - Higher Level Analysis Connecting inequality analysis to development economics and international topics.

Cross-topic links | Development connections | International dimension | Higher level thinking | Synthesis skills | Integration

Real vs Theoretical Analysis - Critical Evaluation Moving beyond textbook models to analyse real-world inequality complexities.

Real world application | Critical analysis | Policy complexity | Implementation challenges | Practical economics | Evaluation depth

Real Exam Questions

Past Paper Analysis: Inequality Questions - Model Answers Breaking down successful responses to inequality questions with examiner insights.

Past paper analysis | Model answers | Examiner feedback | High scoring responses | Common mistakes | Success strategies

Inequality Essay Planning - 15-Mark Structure Planning and structuring evaluation essays on inequality and redistribution policies.

Essay planning | 15-mark structure | Evaluation essays | Argument development | Evidence use | Essay technique

Data Response: Inequality Statistics - Interpretation Skills Analysing and interpreting inequality data in Paper 2 and Paper 3 questions.

Data interpretation | Statistical analysis | Inequality data | Graph reading | Trend analysis | Data response skills

Policy Evaluation - Weighing Trade-offs How to evaluate the effectiveness and limitations of inequality reduction policies.

Policy evaluation | Trade-off analysis | Efficiency vs equity | Unintended consequences | Policy limitations | Balanced evaluation

Emerging Issues & Future Trends

Technology and Future Inequality

Artificial Intelligence and Jobs - The Next Disruption How AI might reshape labor markets and income distribution in coming decades.

AI impact | Job automation | Skill polarization | Future work | Income effects | Policy responses

Universal Basic Income - Solution or Problem? Debates around UBI as a response to technological unemployment and inequality.

Universal basic income | Automation response | Income guarantee | Work incentives | Pilot programs | Future welfare

Digital Currencies and Wealth - New Forms of Inequality How cryptocurrencies and digital assets create new forms of wealth concentration.

Digital assets | Cryptocurrency wealth | Digital divide | Financial inclusion | New inequalities | Regulatory challenges

Platform Economy - Gig Work and Precarity The rise of platform work and its implications for income security and inequality.

Platform economy | Gig work | Income insecurity | Worker rights | Platform power | Labour futures

Environmental and Social Challenges

Green Transition Inequality - Who Pays for Net Zero? How the transition to sustainable economies affects different income groups.

Green transition | Carbon pricing | Transition costs | Just transition | Energy poverty | Climate policy

Demographic Change - Aging and Inequality How population aging affects intergenerational inequality and fiscal sustainability.

Population aging | Pension systems | Intergenerational equity | Healthcare costs | Demographic transition | Fiscal pressure

Urban-Rural Divides - Spatial Inequality Growing gaps between thriving cities and left-behind regions.

Spatial inequality | Urban-rural divide | Regional development | Infrastructure gaps | Agglomeration effects | Place-based policy

Post-Growth Economics - Rethinking Progress Alternative economic models that prioritize equality and sustainability over growth.

Post-growth economics | Wellbeing focus | Doughnut economics | Alternative measures | Sustainability | New economics

IB Econ Inequality Graphs

Why This Hub Matters for Your IB Success

Understanding inequality isn't just about memorizing the Lorenz curve - it's about grasping one of the most important economic challenges of our time. Every post in this hub connects to your broader IB Economics understanding, whether you're analysing market failures, evaluating government policies, or discussing development strategies.

For Maximum IB Exam Success:

• Master the technical tools (Lorenz curves, Gini coefficients) for Paper 3

• Use specific policy examples from this hub in your Paper 1 essays

• Connect inequality to other topics like development, trade, and market failure

• Develop sophisticated evaluation skills using the frameworks provided

• Practice with real-world case studies and current data

Ready to Master Inequality? Start with the measurement tools to build your technical foundation, then explore the causes and consequences before diving into policy solutions. Each post builds your analytical skills while providing concrete examples for exam success.

This hub is regularly updated with the latest inequality data, policy developments, and exam requirements. Bookmark this page and return regularly as you progress through your IB Economics course.

For access to all key diagrams, model answers, and exam strategies,

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