In the name of ALLAH who is the In the name of ALLAH who is the most Beneficent and the Merciful.most Beneficent and the Merciful.

Prepared by:

Usman Sarwar (2443-SE/BSECO/F14)

1. Economic Equality

2. Economic Efficiency

3. People Face Trade Offs

4. Life Example

5. What is Equality Efficiency Trade-off ?

6. Is there a trade off ?

7. Equality Vs Inequality

8. Income Distribution and Growth Sustainability

9. Economic Effects of Inequality

10. Advanced economies have steady growth

11. It’s a roller coaster for some

12. Lasting Effects

13. Factors effecting growth spells

14. No trade-off exists

It refers to equal life chances to provide all citizens with equal minimum of income, goods, and services

It looks at the distribution of capital, goods and access to services throughout an economy

An important ingredient in promoting and sustaining growth

An economic state in which every resource is optimally allocated to serve each individual or entity in the best way

It relates how well a market or economy allocate scarce resources to satisfy unlimited wants

Trade off is a situation that involve losing one quality or aspect of something in return for gaining another quality and aspect

A student faces a trade off between studying for exam or to watch a much awaited movie.

An equity-efficiency trade off exists whenever activity in a given market may simultaneously increase productive efficiency and decrease distributive equality, or vice versa.

Many economists believe that there is trade-off between equality and economic growth.

Then why do governments try to reduce it?The answer is a simple one: Because there is NO trade-offEvery government would want wage gap and inequality if it was

good.

Inequality gives a sudden boost

But equality is much better

The growth through it might be slow but is sustainable

Some inequality is essential to the effective functioning of a market economy

Longer growth spells are robustly associated with more equality

Increased inequality may shorten growth duration

Social unrest and civil disobedience

Limited access to health care and education

Volatile incomes, high debts

Capital investments skewed towards preferences of the rich

• Countries in the chart• United Kingdom• United States• Both have a graph that is going uphill smoothly• There are no sudden drops

• Four countries in the chart • Brazil and Chile have a smooth ride• For Cameroon and Jordan

it’s a roller coaster

•The graph has years in growth spells on y-axis and inequality on x-axis

•Clearly it can be seen when inequality is low growth spell lasts longer

•And the more the inequality, the less sustainable is growth

Factors include :

•Political Institution•Trade Openness•Exchange rate competitiveness•External Debt•Foreign direct investment•Most important factor is Income distribution

Inequality might give a sudden boost but it can also create a economic boom similar to 1930s and 2008

Growth this way is not sustainable Equality is better in the long run Growth through equality is sustainable And it actually increases economic growth by a fair margin Therefore there is no trade-off between inequality and efiiciency

‘‘..the conflict between equality and economic efficiency is inescapable.’’

-Arthur Okun (1975)