The Effect of Income Inequality on Economic Growth

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1. Introduction and Motivation Only one century ago we had no airplanes, no computer no cell phones, no internet, no luxurious Bmw`s to show off with. We had only simple versions of cars, trucks, telephone and black and white cameras. Less than one in five homes had running water, flush toilets, a vacuum cleaner or gas or electric heat. However, in the today`s world of shiny cars, luxurious apartments and houses equipped with appliances a man from the previous century cannot even imagine and with phones and computers that do the thinking instead of us, there is another world, a world that few of us pay attention to. What is striking about it, is that people live like the ones century ago, or even worse. Almost half of the world — over three billion people — live on less than $2.50 a day. 22,000 children die each day due to poverty, nearly a billion people entered the 21st century unable to read a book or sign their names, Some 1.1 billion people in developing countries have inadequate access to water, and 2.6 billion lack basic sanitation. And while the richest 1% of the population owns about 46% of global wealth($110 trillion), the bottom 50% of the population barely owns $1.7 trillion (some 0.7% of the world's wealth), about the same as the world's 85 richest people. ( So, if somebody wonders why did I choose the subject of inequality the previous lines are exactly the reason. The hypothesis I will try to
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