Objective: 

• this course is in the field of economic developent and designed to specifically introduce measures of inequality and poverty and discuss their meaning and applications. to do this, the knowledge of distribution from the fruits of growth would be desired. 

Contents: 

• students will learn the following topics: growth-inequality-poverty relationships, Kuznets hypothesis, meaning of inequality (income homogeneity, population homogeneity, and transfer principle), Lorenz curves and Lorenz comparisons, Lorenz-consistent inequality measures and decomposable inequality measures, Gini coefficient and its decomposition by factor components, generalized entropy class of measures (e.g., Theil indices) and their decomposition by population sub-groups, Theil indices and the Kuznets process for urbanization and educational expansion, measurement of regional income inequalities, and measures of poverty such as the Foster-Greer-Thorbecke (FGT) index. Based on these inputs, students are expected to work on the group research project using raw data

• some STATA commands are introduced in computer workshops to conduct inequality and poverty analyses using actual household survey data.

• in the latter half of the course, students will read important journal papers in the field of inequality

Grading instructions 

• term Paper 40%, Group Presentation 15%, Individual Presentation 15%, Mid-Term Paper 15% and Homework 15%

Others

• this course is designed originally for MPMA graduate program. However, the non-MPMA students who meet the prerequisite are welcome to this course. The prerequisite is the knowledge of Microeconomics, Macroeconomics, and Econometrics.  For Econometrics,  the knowledge of "Introductory Econometrics: A Modern Approach" by Professor Jeffrey M. Wooldridge is required

Selected references

• handbook on Poverty and Inequality. world bank. ISBN/ISSN: 9780821376133

  • Download from the following URL: https://openknowledge.worldbank.org/bitstream/handle/10986/11985/9780821376133.pdf 

• analysis of Household Surveys: A Microeconometric Approach to Development Policy (Reissue Edition). world bank. ISBN/ISSN: 9781464813313.

  • Download from the following URL: http://documents.worldbank.org/curated/en/593871468777303124/pdf/17140-PUB-revised-PUBLIC-9781464813313-Updated.pdf 

• distribution and Development: A New Look at the Developing World. MIT Press. ISBN/ISSN: 0262561530

• development Economics. Princeton University Press. ISBN/ISSN: 0691017069

Course schedule

September 23: Course Introduction

• Overview of this course

• Microdata for the analysis of inequality and poverty: World Bank Living Standards Measurement Study (LSMS), IPUMS International, PovcalNet

• Sampling methods: Random Sampling, Stratified Random Sampling

  • *people without ID are sampled, too.

• Brief introduction to the within and between inequality analysis by using Theil index

September 30: (i) Relationship between Growth, Inequality, and Poverty; (ii) Income distribution; (iii) Poverty line; (iv) Decomposing Poverty Change into Growth and Distribution Components; (v) Microdata Use

• introduction to Applied Statistics and Econometric

• relationship between Growth, Inequality, and Poverty

  • growth-inequality relationship

    • new ways of looking at old issues: Inequality and growth. Journal of Development Economics. 57(2), pp.259-287.

    • economic growth and income inequality. American Economic Review, 45, pp.1-28.

  •  growth-poverty-inequality relationship

    • growth and Redistribution Components of Changes in Poverty Measures: A Decomposition with Application to Brazil and India in the 1980s. Journal of Development Economics, 38(2), pp. 275-295.

    • on a class of poverty measures. metrica, 48(2), pp.437–446.

    • on measuring growth and inequality components of poverty with application to Thailand. Journal of Quantitative Economics, 16(1), pp.67–80.

  • inequality-poverty relationship

    • inequality is Bad for the Poor. Mimeo, The World Bank.

• homework: 

  • randomly make 4 groups. Each group has 3-4 persons. 

  • make descriptive statistics on poverty, growth and inequality based on WDI, WEO database, and PovcalNet. 

  • download a microdata in stata (dta) format from following URL, and review the survey design to confirm if the data is country representative survey or census. Identify income and consumption data.

    • household Socio-Economic Survey, BPS 2008 (Indonesia, 2008 - 2009) https://microdata.worldbank.org/index.php/catalog/1831

    • family Life Survey 2007 (Indonesia, 2007 - 2008)  https://microdata.worldbank.org/index.php/catalog/1044/get-microdata 

  • see the definition of deflator, and deflate nominal income and consumption to real term.

  • think about the effect of seasonality. How does the yearly and monthly income/consumption data reflect seasonality?

  • think about how to measure household living standards. In this regard, what does income and consumption/expenditure explain?

  • review the definition of purchasing power parity (PPP). How is it used for the computation of poverty rate in PovcalNet?

October 7: (i) Introduction to Mircodata Analysis by STATA

• introduction to applied statistics and microdata analysis by STATA

  • display design, dta file, importing data, saving data, data editor, do file

  • basic commands: list, des, sum, tab, tabstat, gen, egen, drop, replace, if functions, rename, label variable, table, merge, etc.

  • descriptive statistics: histogram, twoway scatterplots plots

  • distribution: normal distribution, lognormal distribution, kernel density plots (kdensity), lognormal fit (lognfit) based on MLE, Gibrat's law, Parato distribution

• homework:

  • group work: 

    • discuss the schedule of the group work project. In the following classes, you will learn some theories of inequality and poverty analysis. Based on the theoretical understanding, you are expected to work on the analysis of income/expenditure dynamics of a specific country using microdata (the outputs will be presented on either December 16 or January 20). The demo in the next class is one of the example for the analysis.

  • individual work: Read following papers

    • growth still is good for the poor. European Economic Review, vol. 81(C), pp.68-85.

    • growth is Good for the Poor. Journal of Economic Growth, 7(3), pp.195-225.

• announcement: No class on October 14. The makeup class will be held at 13:25 on October 19. The class room will be changed to 6409,

October 19: (i) Announcement of the student presentation on January 20 and the term paper; (ii) Measuring Economic Inequality 1: Lorenz Curves, Lorenz Comparisons, Gini Coefficient, Poverty Head Count Ratio and Poverty Gap Ratio; (iii) Demo on the analysis of the relationship between growth, inequality and poverty; (iv) Demo on the analysis using OLS, Quantile Regression and Quantile Plots

• the class room will be changed to 6409.

• quick review of the reading assignments by students. 

• announcement of the student presentation on January 20 and the term paper.

  • please see the file "Term Paper Rikkyo  2019 Fall" saved in the google drive.

  • review and demo: Analysis of the relationship between growth, inequality, and poverty

  • demo: OLS and Quantile Regression to verify the  expenditure dynamics in Vietnam, 1992/93

• homework:

  • read following paper and the chapters:

    • chapter 6, handbook on Poverty and Inequality. 

  • IPM  Homework 1 -- google drive

October 21: Measuring Economic Inequality 2:  Four Criteria for Inequality Measurement

• four criteria for inequality measurement: (a) anonymity, (b) income homogeneity, (c) population homogeneity and (d) transfer principle

  • lecture Note 2: Meaning of Inequality

  • lecture Note 3: Inequality Measures and Inequality Measures Example

  • IPM Homework  2 

  • IPM Homework 3

• announcement of the presentation #2 and the term paper #2.

• homework: Read and summarize the following pages and paper.

  • pp. 111 - 117, handbook on Poverty and Inequality

  • "2019IZA_Trapeznikova_Measuring income inequality"

October 28: Measuring Economic Inequality 3: (i) Generalized Entropy Class of Measures (e.g., Theil Indices) and Their Decomposition by Population Sub-groups; (ii) Foster-Greer-Thorbecke (FGT) Index 

• presentations based on the summary of Haughton  and Khandker (pp.111-117, 2009):

  • decomposition of income/expenditure inequality (Theil indices and their decomposition)

  • income distribution dynamics

*note: 20 - 25 minutes for one presentation and 15 minutes discussion to each presentation.

• Demo: Theil Decompositions to verify the  expenditure dynamics in Vietnam, 1992/93 and 1997/98

• homework:

  • IPM Homework  4

  • review the past homework with the answer sheets saved in the google drive.

Enjoy the festival!

November 11: Inequality and Mobility 1

• • mobility report cards: The role of college in intergenerational mobility. HCEO Working Paper Series.

  • homework:

    • review the past homework with the answer sheet

November 18: Inequality and Mobility 2

• • intergenerational mobility and preferences for redistribution. American Economic Review, 108 (2), pp.521-554.

November 25: Inequality and Democracy

• • why hasn't democracy slowed rising inequality? Journal of Economic Perspectives, 27 (3), pp.103-124. 

  • democracy, redistribution and inequality.  a working paper. 

 December 2: Income Distribution--The Very Top of the Income Distribution

• • defending the one percent. Journal of Economic Perspectives, 27 (3), pp.21-34.

 December 9: Inequality, Health and Economic Mobility Over the Life Course

• • economic status and health in childhood: The origins of the gradient. American Economic Review, 92 (5), pp.1308-1334.

  • homework: please upload your individual presentations to each presentation date folder

 December 16: Divergence and Convergence--Economic Growth and Inequality

• • uneven growth: A framework for research in Development Economics. Journal of Economic Perspectives, 24 (3), pp.45-60.

  • bones, bombs, and break points: The geography of economic activity. American Economic Review, 92 (5), pp. 1269-1289.

Merry Christmas 2020

January 20: Group Presentations and the Submission of Two Term Papers