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Lesson 3: Poverty and Inequality: BBE 4303-Economic Development

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Lesson 3:

Poverty and
Inequality

BBE 4303- Economic


Development
Photo not mine. No copyright infringement intended
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 In the Philippines, the
National Economic and
Development Authority
(NEDA) has estimated the
poverty threshold to be
Php 10,727 per month for a
family of five. To meet the
family’s basic food needs
for a month, it would need
no less than Php 7,337.

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 Absolute poverty is when  Relative poverty is when households
household income is below a have some money for the basic
certain income level (poverty needs but not enough for anything
threshold) that will not more than that. Some experts would
suffice to meet a person/ say that relative poverty is when
basic needs including food, households receive 50% less that the
clothing and shelter. In this average household income.
state of poverty, economic
growth will have no or will
have very little effect on
their living condition.

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Who are more Vulnerable to Poverty?

Photos not mine. No copyright infringement intended

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Table 1. Philippine Poverty Trends 2003-2015

Source: Vulnerability to Poverty in the Philippines: An


Examination of Trends from 2003 to 2015, PIDS August 2018
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EXTENT OF WORLD POVERTY

Source: https://ourworldindata.org/extreme-poverty 8
: https://ourworldindata.org/extreme-poverty 9
While this is a definite improvement in
terms of statistical figures, it remains an
intolerable hardship in terms of actual
account, this still means that over 17
million Filipinos are living in extremely
miserable living conditions

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Table 2. Philippine Provinces with Highest Poverty Incidence
THOUGH POVERTY IS A
NATIONAL PROBLEM, IT IS
NOT EVENLY DISTRIBUTED,
WHERE SOME PROVINCES
OR REGIONS ARE BESET
WITH A HIGHER POVERTY
RATE COMPARED TO
OTHERS.

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Income Inequality
 
•Income inequality is an extreme
disparity of income distribution with a
high concentration of income or wealth
usually held by a small percentage of the
population.

•When there is income inequality, there


is a large gap between the wealth of one
population segment as compared to
another
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How is Income Inequality Measured?

There are two basic measures of income inequality:

1.Gini Coefficient
2.Lorenz Curve

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The Gini coefficient/index was developed by
Corrado Gini in 1912. The coefficient ranges from 0 (or 0%)
to 1 (or 100%), with 0 representing perfect equality and 1
representing perfect inequality.

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Lorenz Curve is a way of showing the distribution of income/wealth within
an economy. The curve shows the cumulative share of income from different
sections of the population.

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https://www.investopedia.com/terms/g/gini-index.asp
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JUST HOW UNEQUAL IS
INCOME INEQUALITY Name
Forbes List of Richest Filipinos ,2019
Net worth (US $)
IN THE PHILIPPINES?
1.Sy siblings $17.2B
2.Manuel Villar $ 6.6B
3.John Gokongwei, Jr. $ 5.3B

 “According to the Forbes Magazine 2019 4.Enrique Razon, Jr. $ 5.1B


list of the world’s billionaires, 17 tycoons 5.Jaime Zobel de Ayala $ 3.7B
from the Philippines and their families
are among the wealthiest on the planet.
These select group of individuals had an 6.Lucio Tan $ 3.6B
estimated combined fortune about 14% 7.Tony Tan Caktiong $ 3.0B
of the country’s GDP”
8.Ramon Ang $ 2.8B
9.Ty siblings $ 2.6B
10.Andrew Tan $ 2.55B
https://www.forbes.com/sites/forbespr/2019/09/25/a-new-generation-of-
tycoons-debut-on-2019-forbes-philippines-rich-list/#21d7c7bf6084

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Poor vs. Not Poor

Table 3. Economic Status Classification as to Monthly Income

Income classification Monthly Income


(average income for a family of five)
Rich At least ₱ 190,400
High income (but not rich) Between ₱ 114,240 to ₱ 190,400
Upper middle income Between ₱ 66,640 to ₱ 114,240
Middle middle income Between ₱ 38,080 to ₱ 66,640
Lower middle income Between ₱ 19, 040 to ₱ 38,080
Low income (but not poor) Between ₱ 9,520 to ₱ 19,040
Poor Less than ₱ 9,520

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POLICY OPTIONS
What kinds of economic and other policies might LDC
government adopt to reduce poverty and excessive inequality
while still promoting economic growth?
1. Altering the functional distribution of income through
policies designed to change relative factor prices.

2. Modifying the size distribution through progressive


redistribution of asset ownership.

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3. Reducing the size distribution at the upper levels through
progressive income taxes.

4. Increasing the size distribution at the lower levels through


direct transfer payments and the public provision of goods and
services.

POLICY OPTIONS

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This Photo by Unknown Author is licensed under CC BY

THANK YOU!

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