1. Master’s Macroeconomics Introduction: Macro Data
Christopher Clarke
Washington State University
Jan. 9, 2017

2. GDP & Income Inequality
Aggregate GDP (total size of a pie): the aggregate product, income, and expenditure for an economy in a given period of time
GDP per capita (average size of a pie): the average GDP for each person in the economy
Income Distribution (share of a pie): the distribution of GDP among different groups
Capital vs labor
Among households
Summation vs. Distribution

3. GDP and the Power of a Nation
GDP $Trillion
 World
73.89 1
 United States
18.04
 European Union
16.23 2
 China
11.01 3
 Japan
4.12 4
 Germany
3.36 5
 United Kingdom
2.86 6
 France
2.42 7
 India
2.10 8
 Italy
1.82 9
 Brazil
1.77 10
 Canada
1.55 11
 South Korea
1.38 12
 Australia
1.34 13
 Russia
1.33 14
 Spain
1.20 15
 Mexico
1.14 16
 Indonesia
0.86 17
 Netherlands
0.75 18
 Turkey
0.72 19
  Switzerland
0.66 20
 Saudi Arabia
0.65
See how this has changed dramatically for China, over time.
"GDP (current US$)" (PDF). World Development Indicators. World Bank. Retrieved 31 December 2016.

4. GDP: China vs the U.S.

5. GDP: China GDP per cap / U.S. GDP per cap

6. Income Distribution: Capital vs Labor

7. GDP and the Power of a Nation: Space

8. GDP and the Power of a Nation: Military
Further Reading:
The Thucydides Trap: Are the U.S. and China Headed for War? Atlantic Monthly. Sep. 24, 2015.
Link

9. GDP and the Power of a Nation: Diplomacy
U.N. located in New York City
World Bank located in Washington, D.C.
International Monetary Fund located in Washington, D.C.
Brenton Woods favored the United States heavily.
Further reading/listening: Benn Steil on Econ Talk

10. GDP and the Power of a Nation: Universities

11. GDP and the Welfare: Happiness Index
A growing field in economics is trying to measure human welfare more accurately than financial wellbeing.
How can GDP over measure wellbeing?
How can it under measure wellbeing?
Increased income does buy happiness.
But only up to about $75,000 per household.
Kahneman & Deaton (2010)
Further reading:

12. Inequality: Occupy Wall Street

13. Inequality and the Future of Capitalism
Capitalists gain profits from the “frozen labor” of the capital. They continue to grow until the proletariat rise up and topple the existing society.
Communism and equality ensue. The ownership of capital is given to society at large through the state, and the benefits of capital are distributed appropriately.

14. Inequality and the Future of Capitalism
Return on Capital is higher than the growth rate of the economy (and wages).
The Great Depression and WWII destroyed vast sums of wealth, thus slowing down the rise in inequality.
Vast amount of data spanning three hundred years and dozens of countries.
Will win Nobel prize for the data alone.

15. Why study both Inequality and GDP growth?
More well-rounded picture
Wilkinson and Picket (2009, 2010)
Almost all the problems we associate with life in modern developed societies can be traced to one common cause. (physical health, mental health, drug abuse, education, imprisonment, obesity, social mobility, trust and community life, violence, teenage pregnancies, and child well-being ) The shared answer is not, as many of our politicians would have it, to speed up and strengthen economic growth, forging policy in the fearful shadow of the markets’ reaction as if they were some kind of capricious deity. Instead, it is greater income equality: if we want to do better we need to become more equal.

16. Measuring Inequality
How to measure inequality of a non-negative variable 𝑦(𝑖) (e.g., income for household in percentile 𝑖) with 𝑖∈[0,1]?
Comprehensive Measure: Lorenz Curve
Summary Measure: e.g., Gini, Variance of Log, etc.
Lorenz Curve: Let the cumulative income of the bottom 𝑥 be
𝐿 𝑥 = 0 𝑥 𝑦 𝑖 𝑑𝑖 0 1 𝑦 𝑖 𝑑𝑖

17. Summary measure of Inequality
Gini Coefficient: Let 𝐿(𝑥) denote the Lorenz curve, then
𝐺𝑖𝑛𝑖 𝑦 =1−2 0 1 𝐿 𝑥 𝑑𝑥
Variance of Log:
𝑣𝑎𝑟 𝑙𝑜𝑔 𝑦 =𝐸 log 𝑦 −𝐸 log 𝑦 2
Ratio of Percentile: e.g., 𝑃 50 − 𝑃 10 ratio 𝑦 0.5 𝑦 and 𝑃 90 − 𝑃 50 ratio 𝑦 0.9 𝑦
Share of the top percentile (Top Quintile, Top 10%, Top 1%, Top 0.1%, etc.)

19. Wage Income Inequality

20. Household Earnings

21. Priv. Transfers and
Asset Income

22. Public Transfers

23. Comparing earnings across the distribution

24. Wealth Inequality

25. Shares

26. The Hill vs. U-Shapes

27. More Inequality Data
World Wealth & Income Database