# Economic Disparity : Measurement and Socio-economic Factors

## Introduction

According to Forbes, there are about 2,755 billionaires in the world as of 2021. The World Bank, on the other hand, estimated that more than 700 million people worldwide were living on less than \$1.90 per day. Economic disparity refers to the unequal distribution of money and opportunity among various groups in society. It is the term used to describe differences in wealth and income amongst people of different income groups. And those differences may be very substantial. Numerous factors contribute to economic disparity, but our society hasn’t come to an agreement on what, if anything, should be done about it.

### Measuring Economic Disparity

When it comes to measuring the economic disparity of a nation, there are a number of parameters that need to be considered. They are as follows:

#### The Lorenz Curve and the Gini Coefficient

The Lorenz curve is a graphical representation of the distribution of wealth in a community. The inequality increases with the curve’s distance from the bisector. Similarly, the Gini coefficient, which is derived from the Lorenz curve, is the most extensively used societal metric of income inequality. Its value ranges from 0 to 1. 0 is a perfectly equal distribution of total income assuming each person makes the same amount of money. 1 represents a perfectly uneven distribution of total income, where one person would receive all the money. As a result, income disparity increases with index height.

#### Theil’s Index

Theil’s index calculates the difference between a person’s (or a group’s) population weight and the weight of their relative income to overall income. A score of 0 denotes complete equality whereas a score of 0.5 denotes inequality. This is represented by a society where 26% of people have 74% of the resources and 74% of people have 26% of the resources. A score of 1 denotes inequality, which is represented by a society where 17.6% of people have 82.4% of the resources and 17.6% of people have 82.4% of the resources.

The Theil index is less frequently employed than the Gini index, yet it nevertheless has a number of useful advantages. Its key benefit is that it can be infinitely deconstructed by dividing the population into groups and then breaking each group down into multiple subgroups in order to study the development of inequality within and across subpopulations.

#### The Atkinson Index

The Atkinson index ranges from 0 to 1, with 0 signifying perfect equality and 1 signifying perfect disparity. This index responds to the question: “What percentage of income would society be ready to give up in order to progress toward a truly equal distribution of wealth?”
To put it another way, an Atkinson index of x% indicates that individuals would be ready to forfeit x % of their existing income in order to achieve a more equitable distribution.

#### The Palma Index

We can calculate The Palma index by adding the income received by households in the top decile (top 10%) to the income earned by the 40% most disadvantaged households. This indicator is based on the belief that economic dynamics at the “tails” of the distribution, or the extreme extremities of the resource distribution like earned income, accumulated savings, etc. are mostly responsible for inequality. It offers a precise and synthetic measurement of how much income inequality is actually reduced in nations with progressive tax systems by higher tax rates paid by the wealthy and transfer payments received by the poor.

In contrast to the Gini coefficient, the index does not include the middle class, which, according to empirical studies in many modern nations, accounts for between 50% and 60% of market income and is distributed between the 40th and 90th percentiles. Thus, the Palma index measures inequality between households at the top and bottom of the distribution, or between the extremes of the distribution.

### Socio-economic factors responsible for Economic Disparity

The economic disparity of a nation can be greatly influenced by its social and economic factors like money, education, work, neighborhood safety, and social support. These elements have an impact on a nation’s capacity to make healthy decisions, pay for housing and healthcare, control stress, and other things.

Long and healthy lives are largely dependent on the social and economic chances possessed by a nation, which includes high-quality education, steady employment, and robust social networks. For instance, employment generates cash that influences decisions regarding housing, schooling, child care, food, medical care, etc. Unemployment, on the other hand, restricts these options as well as the capacity to build up money and assets that can serve as a safety net during an economic crisis. Although social and economic elements are not frequently taken into account when discussing health measures to enhance these aspects can, over time, have a more significant impact on health than those typically linked to health improvement, such as strategies to promote health behaviors.

#### Education

The building blocks of development, including much of our economic and social well-being, are laid down in education. Education is essential for improving social coherence and economic efficiency. It aids in lifting the poor out of poverty by boosting the worth and effectiveness of their labor. It is a primary factor for reducing this disparity.

#### Employment

Employment enables people to support themselves, their families, and their communities while also supporting a country’s economic output. It is essential to overall wellbeing and is related to both physical and mental health.

#### Income

The distribution of income has a significant impact on social cohesion, level of poverty for a given average per capita income, poverty-reducing benefits of growth, and even the health of the population. As a result, income distribution has a significant impact on the overall development of a nation.

#### Family & Social Support

The importance of family and communities as a key institution for carrying out crucial production, consumption, reproduction, and accumulation functions that are connected to the socio-economic empowerment of individuals and societies has been demonstrated by well-established bodies of research evidence. They are primarily responsible for the upbringing, education, and socialization of children as well as for teaching civic virtues and a sense of community.

#### Community Safety

An environment that is safe and healthy for people can minimize injury and illness expenses, lower absenteeism and turnover, boost productivity and quality, and improve residents’ morale. In other words, community safety benefits the nation in many ways.

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