IB Economics: Income Inequality & Redistribution FAQ

Most marks vanish at the evaluation step. Students name a policy — progressive taxation, a minimum wage, transfer payments — but never weigh it against equity, efficiency and the government's budget constraint. Examiners also penalise Lorenz curves without labelled axes, or a Gini figure quoted but never interpreted.

Not conceptually hard — evaluatively demanding. Students comfortable with data-response questions elsewhere often stumble here because the command term 'evaluate' requires a genuine argued judgement, not a memorised list of policies. With structured practice on past Paper 2 and Paper 3 questions, most students improve within a few weeks.

It typically appears as one data-response question in Paper 2 and can surface in HL Paper 3's quantitative questions, but it rarely carries its own dedicated Paper 1 essay. Expect it woven into broader macroeconomic questions on government intervention rather than tested as an isolated topic.

The Lorenz curve is a graph plotting cumulative % of population against cumulative % of income, showing the shape of inequality. The Gini coefficient is a single number between 0 and 1 that summarises how far that curve bows from perfect equality. You need both: the curve for diagrams, the coefficient for quantifying change.

Full diagram marks need four elements: correctly labelled axes, the 45-degree line of perfect equality, the actual Lorenz curve bowing below it, and a title. Miss any one of these and examiners cap the diagram mark even if your explanation is strong.

A strong evaluation paragraph makes a judgement, not a list of pros and cons. State the policy's likely effect, explain the mechanism, then weigh it against a counterargument — equity versus efficiency, short-run versus long-run — before a conclusion tied to the question's context.

Examiners reward specific, sourced examples over vague ones. Useful cases: South Africa's Gini coefficient, among the world's highest at around 0.63 according to World Bank data; Sweden's redistribution model; the UK's Universal Credit reform. Naming one country, one policy and one figure beats a generic 'developing countries have high inequality' claim.

The Economics guide groups redistribution tools into three types: taxation (progressive income tax, wealth taxes), transfer payments (unemployment benefits, pensions, universal basic income) and direct provision (public healthcare, subsidised education, social housing). You're expected to evaluate each against effectiveness, cost to government, and possible disincentive effects.

It sits in Unit 3 (Macroeconomics) and is examinable at both SL and HL — it isn't an HL-only extension. HL students go further with quantitative Lorenz curve and Gini questions in Paper 3, but the core content and command terms are identical across both levels.

Income inequality connects directly to poverty and government intervention within Unit 3, and to market failure discussions around merit goods like education and healthcare in Unit 1. HL Paper 3 questions often ask you to link a rising Gini coefficient to falling tax revenue or labour market failures covered earlier in the syllabus.

Income inequality measures differences in what people earn — wages, profit, rent — over a period, usually a year. Wealth inequality measures differences in what people own — property, shares, savings — built up over a lifetime. Wealth inequality is almost always more skewed, and the IB expects you to distinguish the two explicitly.

Look for three things: clear notes explaining the Lorenz curve and Gini coefficient, worksheets that force evaluation practice rather than just definitions, and mark-scheme-aligned mock papers so your child sees what examiners actually reward. On revisionprep.com, revision notes and topical worksheets on this exact topic sit alongside full timed mock papers.