Poverty, Inequality and Income Distribution - Essay Example

Poverty, Inequality and Income distribution Introduction Poverty, inequality and income distribution are significant factors that affect the economy of a country or region. The three economic aspects are interrelated even though they carry weight on their own. They affect the well-being of people in the economy; the ‘well being’ is critical since it determines the productivity of people. From an individualistic and welfares approach, it is possible to relate income with well being or utility. Income can be interpreted from another perspective as a commander of resources. Income distribution can be viewed from two different functional perspectives. The first is the functional approach and the second one is the size. The functional approach relates to distribution of income among factors while the second one, size relates to the distribution of income among individuals. Functional distribution determines relative prices, output and employment; factors which subsequently determine the well-being of people in a particular economy. Personal distribution (size) on the other hand determines household saving, self – investment and payment of necessities (Mittelhammer, 1996). The size of the income and the needs determine the poverty status of an individual. Poverty levels subsequently affect the productivity of people. Inequality is determined by the distribution of income in a given country. However to derive inequality from income distribution into a systematic consideration of inequality, there is need for one to consider various issues on value judgment s contained in equality comparisons (Mittelhammer, 1996). It is due to significance of these items that it is necessary to conduct this study. This paper will mainly focus on their interdependencies, determinants and their effect on the people who live in the United States particularly in New York. The data for this study will be obtained from a survey to be conducted in the area. Sampling Plan Data for this research paper will be collected from a survey. Sampling will be conducted to determine the income distribution, inequality and poverty levels among people. We will use the traditional paper and pencil interviews to conduct the interviews, which will be face to face. Information from the samples is critical for this paper since it will affect the precision of our observation on the effects of the factors. Therefore, the minimum expected sample size will be the difference of the between the upper and lower limit of the expected confidence interval. The survey however intends to target 200 people selected randomly on an unbiased basis. For the sampling list, the survey will be conducted in New York but it will try to cover people from other states that live in the region. The sample will also cover males and females of different ages. Therefore, the list will show the name of the respondent, original place of residence, gender, age and the income earned by the individual. The survey will use probability sampling particularly simple random sampling. Since this is a study on poverty, inequality and income distribution, the elements in the sampling frame should be given an equal probability of selection to allow for the greatest number of possible samples. As indicated earlier, the data will be obtained from the selected samples using structured questionnaires. The structured questionnaires are used since survey will require a low participation of the interviewer but a large sample size is to be covered. The questions to be used on the questionnaires will be open ended i.e. the respondent will not be limited to answer within a specific context. The respondent will only be asked to respond once due to time limitations on our part. Potential respondents will be stopped and the reasons for the survey will be explained to them for them to make a decision if they will participate or not (Mittelhammer, 1996). Incentives are critical during any survey since they increases the number of respondents in addition to enhancing cooperation i.e. reduction of ‘I do not know answers’. For this survey, we will move around with university branded T- shirts to distribute to the potential respondents. It is our belief that some of the respondents may be pleased with the humble gesture and they will subsequently cooperate. The use of the T – shirts is more economical than the use of money as an incentive. Furthermore the strategy to be used will be the opt – in approach. The opt – out approach is not suitable since the respondents may decide to be uncooperative at a certain stage since they were included in the survey unwillingly. In the opt – in, approach, the potential respondents will be asked to participate in the survey voluntarily. Additionally, the opt –in approach will save on time unlike the opt- out approach therefore it is the most appropriate approach for this study (Mittelhammer, 1996). Survey Instrument Questionnaires have been selected for this study due to various reasons such as; they are cheap, they do not require substantial effort from the interviewer, and they make it easier to compile the data since most of the questions are in general standardized. The questions will be administered via a face to face with the respondents. This is to avoid cases whereby the respondents may interpret the questions differently. The questions will cover the economic status of the respondent. The main areas will be the age, location of birth, current residence, the respondents profession, the period in the current job and the salary of the respondent. Other matters that may be included include the number of dependents and if the current salary is sufficient to cater for the needs of the respond (his/her own opinion). Furthermore, the questions may also cover the reasons why the respondent shifted from his/her birthplace to the current location. The questions will be designed to cover five minutes maximum but exceptions will be made while on the field for slow responders or for the respondents who may have many issues to share. Therefore, there will be no incentives for the respondents who may take more than five minutes since it will have been done at will (Mittelhammer, 1996). The questions will flow from the least sensitive to the most sensitive. Additionally, the questionnaire will follow the screens, warm –ups, transitions, skips, difficult and classification order (Mittelhammer, 1996). Screening questions will be at the beginning and they will be used to determine the respondents’ willingness to continue with the interview. Warm – ups will be included to capture the respondent’s attention. Transition questions will be will be used to join two sections especially if they have some difficulty. Skips will be used to prompt the respondent to connect an answer with the previous answer. Difficult questions will be used towards the end when the respondent is comfortable with the whole exercise. Questions, which classify the respond, will be at the end since the respondent may decide to ignore them due to various reasons. Placing them at the beginning or at the end may ruin the whole exercise. Considerable care will be taken for the questions to be clear and non – provocative (Mittelhammer, 1996). Data Analysis The survey needs to be conducted in a manner that will yield optimal results for the analysis to be a made. For sufficient information to be collected, the sample size will have to be adequate. Sample size is critical in this survey because of the significance of statistical power in this survey. To determine the sample size, the following equation may be used; N = 4 (zcrit)2 p(1 - p) D2 Where N will be the sample size, p is the pre – study estimate of the sample to be interviewed, zcrit is the standard normal deviation that is corresponding to the selected criteria and 1-p is the expected minimum difference and D2 is the total width of the expected confidence interval (Mittelhammer, 1996). Quantitative analysis methods will be used to analyze the data from this survey due to the presence of figures. The main items to be measured in this case will be the income distribution and inequality. To determine inequality, analysis will rely on the Gini coefficient, which is given as; Where refers to mean income. x will represent income while n will be the number of respondents covered in the survey .The figures derived from the above quantitative approach will be represent income distribution and inequalities if there is any present (Mittelhammer, 1996). Data quality refers to the capability of data to be used effectively, economically and rapidly to inform and help in evaluation of decisions (Mittelhammer, 1996). The data collected from the field should be relevant and consistent. Poor quality of data will lead to a misleading analysis of the results. The wrong analysis will provide wrong information, which cannot therefore to make a conclusion on the subject matter. Additionally poor quality of data particularly due to inconsistency may also create difficulties during the analysis stage of the paper (Mittelhammer, 1996). Data quality is caused by bias, measurement errors and bad questionnaire design. For bias to occur, the item being estimated is either over-estimated or under-estimated. Measurement errors on the other hand occur when due to errors in the data collection process such as wrong entries. Lastly, a bad questionnaire design may also result in poor data due to ambiguous questions and wrong design of questions (Mittelhammer, 1996). Mittelhammer (1996) indicated that missing data values occur when no data is entered for a certain variable during data collection. If ignored they may affect the conclusions to be made significantly since they distort the perceptions about the population. In case of missing data; imputation method will be applied to estimate the values. Imputation involves the replacement of missing data values with substituted values. According Mittelhammer (1996), imputation for the data points it is referred to as unit imputation while it is referred to as item imputation if it is for a data point component. Data imputation can either be done by case deletion, single imputation or multiple deletion. In this case deletion will be used. Case deletion involves the deleting of all cases where there are missing data values. This method is effective even though it decreases the sample size (Mittelhammer, 1996). Reference List Mittelhammer, R. (1996). Mathematical Statistics for Economics and Business. New York, NY: Springer Verlag. Interview questions 1. What is your name? 2. Age? 3. Profession? (If not employed state). 4. How long have you been in your current job position? 5. What is your salary? 6. How many dependants do you have? List requirements if there are dependants present. 7. Where do you stay? Is the place the birthplace? 8. If 7 (above) is “No” give economic reasons that may have contributed to the switch. 9. According to you, do you think the current salary meets your needs fully? 10. Do you consider yourself as poor, middle class or rich? Read More