Show Menu
Cheatography

The distribution of income and wealth Cheat Sheet (DRAFT) by

A summary of wealth and income distribution

This is a draft cheat sheet. It is a work in progress and is not finished yet.

Wealth

Wealth
anything owned by people with money value (house, machinery, financial assets, etc.)
Non-human wealth
materi­alistic things (house, assets, etc.)
Human wealth
education, skills, charac­ter­istics, training, etc. (it is difficult to calculate it because it is not a reliable factor)
Private wealth
goods owned by a person with money value (jewelry, land, etc.)
Social wealth
assets owned by government for the benefit of the general public
The national wealth
the total amount of wealth owned by general public and government

The national wealth

The national wealth = private wealth + social wealth

Income

Income
is measured as a flow of earnings over time; can be measured only over time not at a specific point

Disposable income

Disposable income
income after taxation; person can choose how to dispose it
 
higer income tax = lower disposable income
 
higher disposable income = higher consumer expend­iture

Sources of income

Human wealth produces earned income
better education = better income
Non-human wealth produces unearned income
interest, rent, lottery, inheri­tance, etc.
Earned income
income gained from employment (wages, salaries, bonuses, comiss­ions, etc.)
Unearned income (passive income)
not related to employ­ment; from another source
 

The distri­bution of wealth

Reasons for differ­ences
Inheri­tance
creates large wealth gap
Savings and invest­ments
increases ones wealth
Self-made wealth
invent­ion­/de­vel­opment of new products
 
prediction of the future
 
owners­hip­/di­scovery of natural resources
 
luck

Today's trends

Women are working in high-p­aying jobs and own assetes
Increase in home ownership (high prices of real estate increases the wealth)
Both are reasons why distri­bution of wealth is not as unequal as in the past

Reducing wealth inequa­lities

Pre-di­str­ibution policies
education, skills, charac­ter­istics, training, etc. (it is difficult to calculate it because it is not a reliable factor)
Post-d­ist­rib­ution policies
tax, benefits form the govern­ment, etc.

Taxes

Inheri­tance tax
tax disposed on wealth imposed at death; at time of death a certain percentage is taken away
 
Slovakia's tax system doesn't include inheri­tance tax
Wealth tax
people with holdings of wealth are paying each year a special tax; this is one of the reasons rich people flee the country they live in
Other methods
better education, owning of real estate, owning of busnisses
 

The worlds distri­bution of income

richer (devel­oped) and poorer (less developed) countries

Measuring the standard of living in a country

GDP per capita
the total money value of all Gs & Ss produced ina a country in a year; also equal to the national income of the country
Real GPD
measures an economy's total Gs & Ss in a given year, taking into account changes in price levels
Nominal GDP
measures an economy's total Gs & Ss in a year given the current prices, without adjust­ments for inflation

Calcul­ations

Why is GDP per capita sometimes incorrect

It doesn't take into account political or cultural freedom.
It doesn't categorize countries based on their education or health­care.
It excludes unpaid work - charities, etc.
It ignores the impact of economical develo­pment.
It takes into account little inform­ation about private wealth.

Develo­pment indicators

HDI (human develo­pment index)
provides wider measure of living standards and economic welfare than real GDP per capita
 
it combines 3 diffrenet measures

HDI index calcul­ation