# Global Inequality

Business I · Sociology · https://tryals.app/learn/business-i/global-inequality

## A World Ranked by Countries

Your strongest income predictor is **country of birth**. **Global inequality** stacks stratification between societies over stratification within them.

### The Map's Vocabulary
- **Income tiers**: High, upper-middle, lower-middle, and low, measured by **GNI per capita**.
- **Purchasing power parity (PPP)**: Corrects income because a euro buys different amounts of life in Oslo and Nairobi; uncorrected GNI overstates gaps by about half.
- **Human Development Index (HDI)**: Measures development via money, health, and education.

### The Empirical Shock
East Asian growth pulled over a billion people out of extreme poverty via compounding: $\text{years to double} \approx \frac{70}{\text{growth rate}}$. A 7% growth rate doubles an economy each decade while a 1% rate barely moves.

> **Pitfall:** Never compare cross-country living standards without PPP correction.

## Three Theories of Global Gaps

Global inequality is explained by three major theoretical families, plus an institutional view:

| Theory | Gap exists because... | Prescription |
|---|---|---|
| **Modernization** | Societies haven't climbed Rostow's staircase (traditional to mass consumption) | Diffuse tech, investment, education |
| **Dependency** | Core powers locked poor economies into exporting raw goods | Restructure world trade |
| **World-Systems** | A global capitalist structure divides the world into **core**, **periphery**, and **semi-periphery** | Understand zone mobility |
| **Institutionalist** | Countries lack **inclusive institutions** rather than extractive ones | Build inclusive legal and political rules |

For business, the **bottom of the pyramid** is both a moral fact and a major market map.

## Practice questions

8 of this lesson's 14 practice questions, with answers. The full set is in the app.

### 1. Since 1990, East Asia’s growth pulled people out of extreme poverty on a historic scale. **Set the slider to the rough number, in billions**, lifted out worldwide.

**Answer:** 1 (within ±0.3)

**Why:** About **1 billion** people crossed out of extreme poverty since 1990, the largest and fastest such exit in history, driven mostly by compounding growth in China and its neighbors. Global inequality *between* countries fell even while inequality *within* many countries rose.

Page: https://tryals.app/practice/business-i/global-inequality/since-1990-east-asias-growth-pulled-people-out-of-extreme-poverty

### 2. Which observations does dependency theory struggle to explain?

A. Former colonies specializing in raw-material exports
B. Terms of trade favoring finished-goods exporters
C. China becoming the world’s manufacturing hub
D. South Korea and Taiwan rising from periphery to high income

**Answer:** C. China becoming the world’s manufacturing hub; D. South Korea and Taiwan rising from periphery to high income

**Why:** Dependency theory predicts the periphery stays locked out, so the East Asian ascents are its hardest cases. The theory’s home turf is options 2 and 4: colonial specialization and unequal exchange, which it explains better than modernization theory does.

Page: https://tryals.app/practice/business-i/global-inequality/which-observations-does-dependency-theory-struggle-to-explain

### 3. Rostow’s stages and Wallerstein’s core-periphery model explain the same income gaps. What is the substantive disagreement between them?

A. Whether development takes five stages or four
B. Whether poverty is a stage passed through or a position produced
C. Whether development should be measured by income or by human development
D. Whether the World Bank or the UNDP classification is more accurate

**Answer:** B. Whether poverty is a stage passed through or a position produced

**Why:** The models differ on causation, so they differ on policy. Stages imply patience and imitation; world-systems implies the relationship itself is the problem.

Page: https://tryals.app/practice/business-i/global-inequality/rostows-stages-and-wallersteins-core-periphery-model-explain-the

### 4. Adjusted for purchasing power, the strongest single predictor of an individual’s income worldwide is their country of birth.

**Answer:** True

**Why:** Location beats education, effort, and even parental class as a global income predictor. Milanović calls it the "citizenship premium." It is stratification’s largest single fact, and the deepest reason migration pressure exists.

Page: https://tryals.app/practice/business-i/global-inequality/adjusted-for-purchasing-power-the-strongest-single-predictor-of-an

### 5. Order Rostow’s stages of growth.

**Answer:**

1. Traditional society
2. Preconditions for take-off
3. Take-off
4. Drive to maturity
5. Age of mass consumption

**Why:** The modernization staircase in its canonical order, elegant, influential, and exactly what dependency theorists accused of mistaking a blocked road for an unclimbed stair.

Page: https://tryals.app/practice/business-i/global-inequality/order-rostows-stages-of-growth

### 6. Core or periphery? Sort each economic profile in world-systems terms.

**Answer:**

- Core: Exports patents, finance, and capital goods, Hosts corporate headquarters and sets standards, Captures the design and branding share of value chains
- Periphery: Exports unprocessed minerals and cash crops, Competes on the price of low-skill labor

**Why:** The zones are defined by *what you sell*: ideas and machines versus rocks and hours. The semi-periphery — assembly platforms, rising manufacturers — sells a bit of both.

Page: https://tryals.app/practice/business-i/global-inequality/core-or-periphery-sort-each-economic-profile-in-world-systems-terms

### 7. Match each measurement concept to its meaning.

**Answer:**

- GNI per capita → A country’s income divided by its people
- PPP adjustment → Correcting for what money actually buys locally
- HDI → Income plus health plus education in one index
- Extreme poverty line → Living below roughly two dollars a day (PPP)

**Why:** Each tool patches a blindness of the previous one: raw income ignores prices, prices ignore health and schooling, averages ignore the floor.

Page: https://tryals.app/practice/business-i/global-inequality/match-each-measurement-concept-to-its-meaning

### 8. Global inequality between countries has narrowed since 1990 while inequality inside many countries has widened. Why can both be true?

A. Between-country inequality is measured in absolute terms and within-country in relative terms
B. One of the two measurements must be in error
C. They measure different partitions of the same population
D. The trends are opposite because reducing one necessarily increases the other

**Answer:** C. They measure different partitions of the same population

**Why:** Decomposing inequality into between-group and within-group components lets the two move independently, and China and India's growth is precisely the case. The 'elephant curve' makes the pattern visible, which is why the honest answer to 'is inequality rising?' begins with 'among whom?'

Page: https://tryals.app/practice/business-i/global-inequality/global-inequality-between-countries-has-narrowed-since-1990-while