ECONOMICS OF INEQUALITY
CEU, Economics Department



Lecturer:  Prof. Ivo Bicanic
                 Recurrent visiting Professor, Department of Economics, CEU, Budapest,
                 Full Professor, Faculty of Economics, University of Zagreb, Zagreb

Course: 2 credits

Grading

Economic inequality is a 2 credit course. The grade will be determined by
(i) in class presentation and class participation which will be 11% of the grade (maximum 11 points) The topic and
date for the in-class presentation will be arranged in consultation with the lecturer and will take place according to the lecture
schedule. The presentation will include a one page handout distributed to the students.
(ii) term paper which will be 25% of the grade (maximum 25 points). The term paper will be worth a maximumn of 25 points
and it can be written on the same topic as the presentation. The paper must be handed in at latest on the day of the exam.
(iii) closed book exam, which will be 64% of the grade (maximum 64 points). The exam has two types of questions which
are answered as a 'closed book exam'. The first type of questions requires 'short' and the second type requires 'long' manswers.
The student will choose 3 'short' questions out of a list of 6 and each answer is worth a maximum of 10 points, maximum 30
points for this section of the exam. The sudent will choose 2 long essays questions out of a list of 4, each is worth a maximum
17 points, a maximum of 34 points for this section of the exam.

Grading: A (100-94 points), A- (95-91 points), B+ (90-86 points), B (85-81 points), B- (80-76 points), C+ (75-71 points),
C (70-66 points), C- (65-61 points), D+ (60-56 points) and D (55-50 points)
 

Course recommended readings:

There is no textbook for the course but a there is a reader which will include an extensive bibliography and articles or chapters
of books covering most of the material dealt with in the lectures. Together with the course schedule there is a list of additional
readings which are recommended in addition to the reader.
 

Seminar topics (class presentation)

Class presentation will start after the first week of teaching and will follow the lecture topics. The topics and dates will be
determined during the first week of teaching. The presentation will take 10-15 minutes and will include a one-page handout
for the other students. It will be followed by a brief discussion. Students can prepare a written essay on the topic which will
be their term paper. The topics cover a wide range of topics relevant for the lecture they follow.

Students who are very anxious to present a topic not coverred by the program are encouraged to propose their topic and
discuss its possible inclusion into the program with the lectures.
 

Lecture schedule: Economic Inequality 0506 (Spring term)

WEEK:1
1. Introduction: the inequality of what? And Measurement axioms
Monday, 24/4/06, 15:00-16:50 (110 minutes)
2. Available data and Measuring inequality
Tuesday, 25/4/06, 15:00-16:50 (110 minutes)
3. Measuring inequality and the distribution of income
Wednesday, 25/4/06, 9:00-10:50 (110 minutes)

WEEK 2
4. Theories of distribution of income from employment
Tuesday, 2/5/06, 15:00-16:50 (110 minutes)
5. Determinants of economic inequality and wealth
Wednesday, 3/5/05, 9:00-10:50 (110 minutes)
6. Poverty concepts and social exclusion Student presentations I
Thursday, 4/5/06, 11:00-12:50 (110 minutes)

WEEK 3
7. Redistribution of income I Student presentations II
Monday, 8/5/06, 15:00-16:50 (110 minutes)
8. Redistribution of income II  Student presentations III
Thursday, 9/5/06, 15:00-16:50 (110 minutes)
9. The world distribution of income and economic convergence
Wednesday, 10/5/06, 9:00-10:50 (110 minutes)

WEEK 4
10. Distribution, inequality development and growth and Student presentations IV
Monday, 15/5/06, 15:00-16:50 (110 minutes)
11. Changes in inequality and poverty during the transition I and Student presentations V
Tuesday, 16/5/06, 15:00-16:50(110 minutes)
12. Inequality and caital market failure
Wednesday, 17/5/06, 9:00-10:50(110 minutes)
 

Topics for student presentations I

The final distribution of topics will depend on the number of students so rearrangmenets are possible.

If someone is very keen to present a topic not on the list he is welcome to discuss his proposal with the
lecturer and fit it into the schedule.

Student presentations I
Thursday, 4/5/06, 11:00-12:50 (week 2)
1. Stochastic process and inequality generation
2. Technical progress and wage differentials
3. The inheritence of Wealth
4. Intergenerational inequality transfers

Student presentations II
Monday, 8/5/06, 15:00-16:50 (week 3)
1. Inequality in rich economies
2. Distributional effects of stabilization policies
3. Optimal taxation theory
4. The political economy of tax progression

Student presentations III
Thursday, 9/5/06, 15:00-16:50 (week 3)
1. Poverty in rich economies and European social charter
2. Poverty in developing economies and social exclusions
3. Sen's Theory of entitlements
4. Gender inequality

Student presentations IV
Monday, 15/5/06, 15:00-16:50 (week 4)
1. Empirical evidence of the Kuznets hypothesis
2. 'Trickle down' and economic growth
3. Regional inequality levels, development and growth
4. Empirical evidence of inequality generated poverty traps

Student presentations V
Tuesday, 16/5/06, 15:00-16:50(week 4)
1. The distributional effects of privatization
2. Social exclusion in transition economies
3. Case study: Inequality and poverty generation in a transition economy
4. Case study: Inequality and poverty generation in a transition economy
 

READER CONTENTS

INTRODUCTION
- Kanbur Ravi and Lustig Nora (2000): "Why is Inequality Back on the Agenda" Annual World Bank Conference on
Development Economics 1999, The World Bank, Washington 2000, pp: 285-306
- Sen Amartya (1993):chapters: "Inequality of What? ", chapter 1, pp12-30 and "Welfare Economics and Inequality",
chapter 6, pp: 88-101 in Inequality Reexaminedc Clarendon Press, Oxford

MEASURING INEQUALITY
- Cowell Frank (2000): "Measurement of inequality", chapter 2, pp: 87-166 in Atkinson Anthony and Bourguignone Francois,
editors (2000): Hanbook of Income Distribution, North Holland Elsevier, Amsterdam
- Cowell Frank (1995):chapters: "Charting inequality", chapter 2, pp: 15-34 and "Analysing inequality", chapter 3, pp: 35-68
in Measuring inequality, 2nd edition, Prentice Hall, London

THEORIES OF DISTRIBUTION OF INCOME FROM EMPLOYMENT
- Neal Derek and Rosen Sherwin (2000): "Theories of the Distribution of Earning", chapter 7, pp: 379-425 in Atkinson
Anthony and Bourguignone Francois, editors (2000): Hanbook of Income Distribution, North Holland Elsevier, Amsterdam

POVERTY
- Lambert Peter (2001): "Poverty", chapter 6, pp: 133-166 of Lambert Peter (2002): The distribution and Redistribution of
Income, 3rd edition, Manchester UP, Machester

REDISTRIBUTION
- Boadway Robin Keen Michael (2000): "Redistribution", chapter 12, pp: 677-790 in Atkinson Anthony and Bourguignone
Francois, editors (2000): Hanbook of Income Distribution, North Holland Elsevier, Amsterdam
- Lambert Pater (2001): "A progressive income tax schedule", chapter 8, pp: 187-218 of Lambert Peter (2002): The
distribution and Redistribution of Income, 3rd edition, Manchester UP, Machester

GROWTH AND INEQUALITY
- Aghion Philippe, Caroli Eve and Garcia-Penalosa Cecilia (1999): "Inequality and Economic Growth: The Perspective
of the New Growth Theories", Journal of Economic Literature, Vol:37 (December 1999), pp:1615-1600
- Helpman Ephrain (2004):"Inequality", chapter 6, (pp: 86-110) in The Myth of Economic Growth. MIT Press, Cambridge, Mass
- Ray Debraj (1998): "Inequality and Development: Interconnections" chapter 7 (pp: 197-247), in Development Economics,
Princeton UP. Princeton NJ

WORLD DISTRIBUTION
- Milanovic Branko (2002): "Decomposing World Income Distribution: Does the World Have a Middle Class?" Review of
Income and Wealth, Vol: 48, No: 2 (June 2002), pp: 155-178
- Snowden Brian i Vane Howard (2004): The Convergence Debate, sections 11.12 (pp: 614-622)
A Modern Guide to Macroeconokics,
 

POVERTY AND INEQUALITY DURING THE TRANSITION
- Milanovic Branko (1999): "Explaining the increase in inequality during the transition" Economics of Transition
Vol: 7(No:1), pp: 299-341
- Gorniak Jaroslaw (2001): "Poverty in Transition, Lessons from Eastern and Central Europe", chapter 6, (pp: 145-172) ,
in Grinspun, Alejandro (ed.) (2001), Choices for the Poor: Lessons from national poverty strategies, New York: UNDP
- Grun Carola and Klasen Stephen (2001): "Growth, income distribution and well-being in transition countries", Economics
of Transition, Vol: 9 (No:2), pp: 359-394
- UN ECE (2004): "Poverty in Eastern Europe", Economic Survey of Europe, No: 3, pp: 163-176