Aims

The module provides a broad overview of the ways in which economic outcomes are unequally distributed within societies, considers the reasons for such inequalities, and discusses the extent to which various ways of redressing them are feasible or desirable. The module is divided into two sections. The first addresses general inequality between all individuals in society, while the second focuses on average-level inequalities between specific societal groups. The module is available to Year 2 students as an optional 10-credit offering. The proposed degree of technical detail is designed to suit students at this level, building on what they have already seen at Level 1.

The distribution of output has always been of fundamental importance to economics. Moreover, the topic of inequality and issues regarding group-level disparities are currently very prominent in public debate; such questions have also attracted strong academic interest in recent times, providing some of the latest knowledge published in leading economic outlets. The module aims to cover a mixture of such state-of-the-art research along with classic economic ideas about distributive justice and redistribution.

Inequality, redistribution and/or discrimination feature in several Year 3 options (labour; development; health; public economics). This module does not seek to substitute for this content. Rather, by introducing students to the topics on a broad basis in Year 2, it aims to equip them with knowledge which may be complemented by (without acting as a pre-requisite for) ideas they may subsequently encounter in these economic subfields in Year 3.

The module includes innovative, interactive teaching methods. Since much of the research on these topics employs experiments, the opportunity exists to make use of lab sessions and connect them to the module’s seminars. In addition to the lectures, there will be two lab sessions and two corresponding seminars; in each lab session students will participate in an experiment, which they will then discuss in the following seminar.

Outline Of Syllabus

Summary of lecture topics
Part 1: Economic inequality between individuals
1.1.       Defining the problem
Summary: This short introductory section explains what is meant by economic inequality, its historical evolution and current severity, and how it differs across countries. We briefly consider different forms of inequality and how they are measured.


1.2.       Human capital
Summary: The human capital framework is a prominent explanation for earnings inequality. This section introduces the theory, discusses general and specific human capital, then presents tests of the theory and applications.


1.3.       Is inequality between individuals unfair?
Summary: We discuss notions of distributive justice. The relationship between equality and equity is addressed. Other concepts considered include utilitarianism, libertarianism, Rawlsian justice and the veil of ignorance. We weigh up evidence on the extent to which equality of opportunity and economic mobility exist.


1.4.       Redistribution
Summary: Is inequality reduction possible, and at what cost? Economic theory typically assumes there is a trade-off between equity and efficiency. We consider the arguments and evidence in favour of and against this proposition.


Part 2: Economic inequality between groups
2.1.       The problem and proposed explanations
Summary: This short section briefly introduces the evidence that economic outcomes differ between groups (e.g. genders; ethnicities). We consider different explanations that have been proposed in the literature, including discrimination, societal norms, group differences in competitiveness, etc.


2.2.       Economic discrimination
Summary: Having established discrimination as a possible explanation for some groups being disadvantaged, this relatively long section takes on a deep exploration of the topic. We consider famous theories from economics about why discrimination might occur (i.e. due to tastes or statistical beliefs), as well as insights from psychology (social identity theory and unconscious bias). The methodological difficulties in measuring discrimination are confronted – do experiments offer a helpful approach? We then look at evidence from studies testing for discrimination by employers, landlords, sellers in online markets and public officials.


2.3.       Anti-discrimination policies
Summary: While the extent of discrimination has been well established, finding policies that can succeed in reducing it represents a mammoth obstacle for society. Has anti-discrimination legislation been effective? Do soft policies, like diversity awareness training, have any effect at all? We also consider the pros and cons of affirmative action policies.


2.4.       Homophily and segregation
Summary: In recent years, economists have become interested in the phenomenon long established in sociology of homophily, which describes the preference for interacting with those similar to oneself. This provides the opportunity to review Schelling’s classic theory of segregation, wherein even mild preferences for homophily can result in complete segregation between groups. Segregation can lead to economic disadvantage, including through exclusion from dominant social networks.


Small class teaching

Lab/seminar 1: Distributive justice.

Lab/seminar 2: Discrimination and social norms.

Teaching Rationale And Relationship

The lectures provide the key course material, supporting knowledge outcomes 1-4 and skills outcomes 1-3. The recommended readings cover additional material, supporting all of the above in addition to skills outcome 4. The small group teaching provides further material and exercises, thereby also supporting knowledge outcomes 1-4 and skills outcomes 1-3, and – by its interactive nature – furthermore supports skills outcome 5.

Assessment Rationale And Relationship

The exam aims to test students’ depth and breadth of knowledge and understanding of the arguments, theories and empirical findings covered in the course. It also aims to test their ability to think critically, interpret data and communicate effectively using discipline-specific language.