Income Inequality

In most countries, including India, inequality in incomes is typically greater than inequality in expenditure patterns.

Broadly speaking, income inequality refers to the fact that different people earn different amounts of money. The wider those earnings are dispersed, the more unequal they are.

But China presents a peculiar case: As per recent paper by researchers Carlos Gradín and Binbin Wu both income and expenditure have similar distribution among China population. It says that China’s income inequality is just 2% higher than its expenditure inequality, but this difference is 38% for India.

This defies very usual logic. Most household in case of crisis resort to the savings tap or expected future earnings rather than reducing the expenditures. This means households are expected to have more inequality in incomes than in spending.

Well India has dominant income inequality. The authors find that the richest 5% in India have 29% of the country’s income, but this share is 19% in China partly due to higher prevalence of people reporting low income and high expenditure in India compared with China.

Or because China has smaller portion of rural households and a higher level of urbanization fueling up the income levels of the people.

Educational disparity worsens income inequality in India. Families whose heads went to college earn more than three times than those whose heads got just primary education.

Well what impact does Income Equality have on the economy? I will like to take your views on the same.