Embed Size (px)
Citation preview
Measuring Regional Disparities
Measuring income disparities
• We need to quantify whether incomes in a region are moving closer together or further apart.
• When there are many regions, some moving one way, and some another, eyeballing diagrams is inadequate.
• Some measures of income more together more quickly than others.
Chart 3a: Nominal GDP per capita in the Atlantic Provinces as a % of Canada, 1961-2002
50
55
60
65
70
75
80
85
90
95
100
1961 1965 1969 1973 1977 1981 1985 1989 1993 1997 2001
Newfoundland
Prince Edward Island
Nova Scotia
New Brunswick
%
Personal Disposable Income: moving together
CANADA1.001.001.001.001.001.001.001.001.001.001.001.001.001.001.001.001.00
REAL DISP. INCOME PER CAPITA
0.00
0.20
0.40
0.60
0.80
1.00
1.20
1.40
IND
EX
RE
LA
TIV
E T
O C
AN
AD
A
NEWF.
N.S.
P.E.I.
QUEBEC
SASK.
MANITOBA
ALBERTA
B.C.
Market income: more dispersed than disposable income
INDICES OF MARKET INCOME PER CAPITA
0.00
0.20
0.40
0.60
0.80
1.00
1.20
1.40
1.60
1976
1978
1980
1982
1984
1986
1988
1990
1992
1994
NEWF.
N.S.
P.E.I.
N.B.
QUEBEC
ONT.
SASK.
MANITOBA
ALBERTA
B.C.
Gross Domestic Product:
• The total market value of all final goods and services produced in an economy in a year.
• It measures the value of all the goods and services produced in a nation, regardless of whether a local person or a non-resident receives it.
Gross National Product:
• The aggregate final output of citizens and businesses of an economy in a year.
– More simply: it is the income earned by the residents of a region, whether from production in the region or elsewhere.
GDP AND GNP COMPARED
• Newfoundland’s GDP (more properly PDP) includes the profits earned from its oil but paid to non-residents.
• Newfoundland’s GNP (PNP) excludes profits on oil production paid to non-residents, but includes the income a Newfoundlander collects on investments in corporations operating in Alberta or the U.S.
Other income definitions
• Personal Income: Income paid to persons.– Includes transfers payments– Excludes undistributed corporate profits
• Personal Disposable Income: Personal income net of income taxes, CPP and EI deductions.
• There are less disparities in these, since we use transfers and taxes to equalize incomes.
More income definitions
• Earned Income: Income earned from economic activity.– Includes Wages, salaries, military pay, farm
income and income from unincorporated business
• Market Income: Income from market activity.– Earned income plus income from
miscellaneous investments, such as bonds.
Measuring the degree if difference
• Index of Variation.– It measures an average of the difference if
each variable from the mean, then divides the average by the mean. The result is a measure that is independent of the units chosen.
– It is the standard deviation of a set of numbers divided by the mean of those numbers.
Calculating the index of variation
– Take the difference between Yi and the mean Y, and then square it. Add the squares up for each region, divide by the number of regions, and take the square root of the result. That gives you the standard deviation.
– Then divide the standard deviation by the mean Y. The result is the index of variation.
Y Y- Ymean Diff. squared
A 120 20 400
B 110 10 100
C 100 0 0
D 90 -10 100
E 80 -20 400
Sum Sum
sqroot gives stdev Index of variation
Mean 100 01000 /5=
200 14.14214.142/
100 0.141
Example
Index of variation: independent of scale
Y Y- Ymean Diff. squared
A 240 40 400
B 220 20 100
C 200 0 0
D 180 -20 100
E 160 -40 400
Sum Sum
sqroot gives stdev Index of variation
Mean 200 0
4000 /5= 800 28.284
28.28/ 200 0.141
Convergence of IncomesEARNED Y
INDICES OF VARIATION
0.000
0.050
0.100
0.150
0.200
0.250
0.300
0.350
0.400
DISP Y
MARKET Y
EARNED Y
Employment
INDICES OF VARIATION
0.000
0.100
0.200
0.300
0.400
0.500
0.600
UNEMP
EMP
INDICES OF VARIATION
0.000
0.100
0.200
0.300
0.400
0.500
0.600
DISP Y
MARKET Y
EARNED Y
UNEMP
EMP
EARNED Y/EMPLOYED
