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25 Cards in this Set

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Health-Poverty Trap

Low Income tends to cause poor health and poor health tends to cause low income

What does the health-poverty trap imply for poverty eradication?

Poverty and health problems have to be simultaneously dealt with to fully eradicate poverty

What are the 6 ways that poverty affects health?

1) Poor people don't have money for health care or nutritious food that will help keep them from being vulnerable to disease


2) Since poor people can't afford drugs, pharmaceutical companies have less of an incentive to devote $ to R&D for those drugs


3) Poor people tend to live in massively overcrowded or rural areas without clean water or sanitation


4) Poor people live further away from doctor's and hospitals, higher obstacle to get care (and prolonged health issues


5) Less educated people tend to have a lower understanding of when they need to see a doctor


6) Uneducated, young women are less able to refuse sex with rich and powerful men (spreading VD and AIDS)

How does health affect poverty?

Human capital and the quality of labor are directly affected by health and directly affect economic growth

How 4 affects does health have on education?

1) Poor health affects absenteeism in schools and which workers at jobs will be trained


2) Quality-quantity of children trade-off: when high child mortality is present, the number of children is increased to increase probability of adult descendants resulting in decreased quality of education and health


3) When life expectancy is low, there is a lower rate of return on education, which deincentivizes going to school


4) Death of parents (like from AIDS) results in a lack of parental guidance and an increased drop-out rate

How can health benefits compound?

When parents see a lower probability of infant death due to one cause, they invest better in other kinds of health

What affects does poor health have on physical capital?

1) Citizens who live longer save and invest more. Poor health results in reduced national savings and investment levels.


2) Human and physical capital are complementary. When one is performing poorly, the other will receive less investment, also.


3) Governments with health epidemics must spend money on health instead of physical capital (such as infrastructure).


4) Private poverty trap - in countries with no public insurance or hard-to-obtain private insurance, members of a poor family will spend their life savings on health issues, resulting in a poorer family and children who leave school early to work

How does poor health and poverty of a country affect institutions?

It causes the society to make poor choices in institutions.

What are microactions for solving poverty and health simultaneously?

Widespread vaccination programs; invest in doctors, hospitals, and general care; keep making progress in making sanitation and clean water more widely available

What are macroactions for solving poverty and health simultaneously?

Provide incentives to invest in pharmaceutical R&D - such as the Kremer vaccine fund (rich countries donate to fund, fund buys vaccine at regular price, donates/sells vaccines to poor countries)

What are the three policy implications of economic growth and income inequality affecting poverty?

1) Encourage more rapid economic growth


2) Improve opportunities for poor (education and health)


3) Provide social safety nets for vulnerable groups

Frequency Distribution

# or % of families in each income bracket

Size Distribution

Share of total income/consumption received by different groups of households

How would one calculate the different income quintiles? Deciles?

Divide the population into 5 groups (20% of population in each group), then divide the group's total income by the total income of all groups. This results in the group's share of total consumption or income. Decile is the same, but the population is divided into 10 groups

What is the Kuznets ratio?

The income received by the top #% divided by the income received by the bottom #%


This indicates how many times more the top makes than the bottom

What is the Lorenz curve?

Horizontal axis: % of income recipients


Vertical axis: % of total income


The Lorenz curve displays inequality in comparison to a 45 degree line

Gini Coefficient

The area between Lorenz curve and the 45 degree line divided by all of the are under the 45 degree line


The higher the number, the higher the inequality

What is Kuznet's Inverted-U-Curve?

The theory that inequality must increase with increasing income per capita before it (inequality) decreases

What can we learn from the Kuznet's Inverted-U-Curve?

Since the theory has been proven wrong, we know that inequality is complex and depends on many cultural variables that different between countries. This means there are a variety of policy possibilities to lower inequality.

What are 6 causes of inequality?

1) History and policies


2) Land ownership


3) Resource endowments


4) Government policies


5) Market forces (industries with higher barriers to entry usually result in high inequality)


6) Corruption and embezzlement

How does one calculate the head-count index?

The total number of people below the poverty line divided by the total population = the % of the population that is poor

What is the poverty gap and how is it calculated?

PG is how far the average poor person is below the poverty line (the severity of poverty)


PG = ((Poverty Line-Mean consumption)/Poverty Line) * Head-Count Index

How is the time taken to exit poverty calculated?

t = (ln(Poverty Line) - ln(Consumption of the poor))/Growth rate of income/capita

What does the time taken to exit poverty tell us?

That with continuous growth (normally not feasible), it will take the poor t years to get out of poverty, which proves that they need assistance

What are 4 reasons to promote global equality?

1) Economic efficiency


2) Spill-over effects of poverty


3) Moral grounds


4) Security