Transcript Measuring regional disparities

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.
%
100
Chart 3a: Nominal GDP per capita in the Atlantic Provinces as a % of Canada,
1961-2002
Newfoundland
95
90
Prince Edward Island
Nova Scotia
New Brunswick
85
80
75
70
65
60
55
50
1961
1965
1969
1973
1977
1981
1985
1989
1993
1997
2001
REAL DISP. INCOME PER CAPITA
1.40
1.20
1.00
0.80
NEWF.
N.S.
P.E.I.
0.60
0.40
QUEBEC
0.20
SASK.
0.00
19
78
19
80
19
82
19
84
19
86
19
88
19
90
19
92
19
94
CANADA
1.00
1.00
1.00
1.00
1.00
1.00
1.00
1.00
1.00
1.00
1.00
1.00
1.00
1.00
1.00
1.00
1.00
INDEX RELATIVE TO CANADA
Personal Disposable Income:
moving together
MANITOBA
ALBERTA
B.C.
Market income: more dispersed
than disposable income
INDICES OF MARKET INCOME PER CAPITA
1.60
1.40
NEWF.
1.20
N.S.
1.00
P.E.I.
N.B.
0.80
QUEBEC
0.60
ONT.
0.40
SASK.
0.20
19
76
19
78
19
80
19
82
19
84
19
86
19
88
19
90
19
92
19
94
0.00
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 nonresidents, 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.
Example
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
Mean
100
Sum
1000 /5=
0
200
sqroot
gives
stdev
14.142
Index of variation
14.142/
100 0.141
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
Mean
200
Sum
0
4000
/5=
800
sqroot
gives
stdev Index of variation
28.28/
28.284
200
0.141
Convergence of Incomes
EARNED Y
INDICES OF VARIATION
0.400
0.350
0.300
0.250
DISP Y
0.200
MARKET Y
EARNED Y
0.150
0.100
0.050
19
94
19
92
19
90
19
88
19
86
19
84
19
82
19
80
19
78
19
76
0.000
Employment
INDICES OF VARIATION
0.600
0.500
0.400
UNEMP
0.300
EMP
0.200
0.100
19
94
19
92
19
90
19
88
19
86
19
84
19
82
19
80
19
78
19
76
0.000
INDICES OF VARIATION
0.600
0.500
0.400
0.300
0.200
0.100
19
76
19
78
19
80
19
82
19
84
19
86
19
88
19
90
19
92
19
94
0.000
DISP Y
MARKET Y
EARNED Y
UNEMP
EMP
EARNED Y/EMPLOYED