UNIVERSITY OF CAPE TOWN
DEPARTMENT OF ECONOMICS
ECO3020F: ADVANCE MICRO & MACROECONOMICS
2022 SUMMARIES
AUTHORED BY: JASON ALPERSTEIN (ALPJAS001)
,LECTURE NOTES - WEEK 6
INEQUALITY & INTERGENERATIONAL MOBILITY
WEALTH VS INCOME INEQUALITY IN SOUTH AFRICA
→ The Gini coefficient is a statistical measure of economic inequality in a
population
→ The coefficient measures the dispersion of income or distribution of wealth
among the members of a population
→ We are all aware that inequality in South Africa stems from Apartheid (and
before)
INCREASED
OVER TIME
→ In 2008, Black Africans had roughly 13% of the per capita income of White
people
→ We are going to focus on two endowments: race and family circumstances
,LECTURE NOTES - WEEK 6
SOCIAL CLASS & MOBILITY IN SOUTH AFRICA
→ We are going to divide SA into 5 categories based on socio-economic class:
Chronically poor, transient poor, vulnerable, middle class, and elite
→ People currently below the poverty line are either chronically poor or
transient poor
→ Chronically poor: People currently in poverty and have a below average
likelihood of escaping poverty
→ Transient poor: People currently in poverty and have an above average
likelihood of escaping poverty
→ People who are currently above the poverty line are vulnerable, middle
class, or elite:
→ Vulnerable: People who are currently not in poverty and have an above
average risk of slipping into poverty.
→ Middle class: People who are currently not in poverty and have a below
average risk of slipping into poverty.
→ Elite: Basically, people at no risk of falling into poverty.
, LECTURE NOTES - WEEK 6
SOCIAL CLASS & MOBILITY
→ Black Africans face the threat of poverty disproportionately, either because they
are currently below the poverty line and are expected to remain so, or because
they are currently above the poverty line but are at risk of falling into poverty in
the future
INEQUALITY IN SA
→ No one still believes that racial differences are caused by differences in ability
→ Apartheid is the primary source of inequality
INTERGENERATIONAL MOBILITY (IM)
→ Refers to the extent to which one’s circumstances of birth determines their future
outcomes
→ We are going to focus specifically on how father’s earnings affects their son’s
earnings but IM can refer to education and occupation
→ IM is derived from equation below (which can be empirically estimated):
→ is child earnings (or outcome) and is parent’s earnings (or outcome)
→ is an error term that captures the influence of all other factors on child
outcomes.
→ captures the average trend in incomes/outcomes across generations due to
DEPARTMENT OF ECONOMICS
ECO3020F: ADVANCE MICRO & MACROECONOMICS
2022 SUMMARIES
AUTHORED BY: JASON ALPERSTEIN (ALPJAS001)
,LECTURE NOTES - WEEK 6
INEQUALITY & INTERGENERATIONAL MOBILITY
WEALTH VS INCOME INEQUALITY IN SOUTH AFRICA
→ The Gini coefficient is a statistical measure of economic inequality in a
population
→ The coefficient measures the dispersion of income or distribution of wealth
among the members of a population
→ We are all aware that inequality in South Africa stems from Apartheid (and
before)
INCREASED
OVER TIME
→ In 2008, Black Africans had roughly 13% of the per capita income of White
people
→ We are going to focus on two endowments: race and family circumstances
,LECTURE NOTES - WEEK 6
SOCIAL CLASS & MOBILITY IN SOUTH AFRICA
→ We are going to divide SA into 5 categories based on socio-economic class:
Chronically poor, transient poor, vulnerable, middle class, and elite
→ People currently below the poverty line are either chronically poor or
transient poor
→ Chronically poor: People currently in poverty and have a below average
likelihood of escaping poverty
→ Transient poor: People currently in poverty and have an above average
likelihood of escaping poverty
→ People who are currently above the poverty line are vulnerable, middle
class, or elite:
→ Vulnerable: People who are currently not in poverty and have an above
average risk of slipping into poverty.
→ Middle class: People who are currently not in poverty and have a below
average risk of slipping into poverty.
→ Elite: Basically, people at no risk of falling into poverty.
, LECTURE NOTES - WEEK 6
SOCIAL CLASS & MOBILITY
→ Black Africans face the threat of poverty disproportionately, either because they
are currently below the poverty line and are expected to remain so, or because
they are currently above the poverty line but are at risk of falling into poverty in
the future
INEQUALITY IN SA
→ No one still believes that racial differences are caused by differences in ability
→ Apartheid is the primary source of inequality
INTERGENERATIONAL MOBILITY (IM)
→ Refers to the extent to which one’s circumstances of birth determines their future
outcomes
→ We are going to focus specifically on how father’s earnings affects their son’s
earnings but IM can refer to education and occupation
→ IM is derived from equation below (which can be empirically estimated):
→ is child earnings (or outcome) and is parent’s earnings (or outcome)
→ is an error term that captures the influence of all other factors on child
outcomes.
→ captures the average trend in incomes/outcomes across generations due to
