Living Standards & Income Distribution (Cambridge (CIE) O Level Economics)

Revision Note

Steve Vorster

Written by: Steve Vorster

Reviewed by: Jenna Quinn

Reasons for Differences in Living Standards and Income Distribution

  • There are many reasons that cause differences in living standards and the income distribution within and between countries

  1. Economic system: a mixed economy provides the highest quality of living standards. There is much debate on how much government planning there should be. However, countries in Scandinavia with a more mixed economic system score very highly on HDI and living standards. With completely free markets (unchecked capitalism), wealth inequalities increase exponentially. With planned economies, shortages abound 

  2. The Government: the values of a government influence their economic agenda, tax system and government spending. Governments are more easily held accountable by the citizens in countries with a low level of corruption 

  3. Corruption: significantly undermines quality of life and the standards of living 

  4. Tax system: most countries have a progressive tax system for corporate and personal income tax. However, there can be many indirect taxes which completely change the quality of life for the poorest households 

  5. Productivity levels: differences in skills result in difference in productivity and higher levels of productivity are rewarded with higher wages, which leads to a better standard of living 

  6. Size of the population: more densely populated countries or cities face more challenges. A larger population can mean higher tax revenues but at the same time, government expenditure on services is spread across more people often resulting in less government spending/capita 

  7. Education levels: These directly influence productivity and wages 

  8. Inflation: Tends to impact poorer households more as any increase in general price levels represents a larger absolute value of their wages when compared to wealthier households 

  9. Regional differences: Many countries have historically poor areas, as well as wealthier ones. Poverty in certain regions can be much higher 

  10. Personal freedoms: religious, economic, personal, political and civil freedoms improve the quality of life within a nation

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Steve Vorster

Author: Steve Vorster

Expertise: Economics & Business Subject Lead

Steve has taught A Level, GCSE, IGCSE Business and Economics - as well as IBDP Economics and Business Management. He is an IBDP Examiner and IGCSE textbook author. His students regularly achieve 90-100% in their final exams. Steve has been the Assistant Head of Sixth Form for a school in Devon, and Head of Economics at the world's largest International school in Singapore. He loves to create resources which speed up student learning and are easily accessible by all.

Jenna Quinn

Author: Jenna Quinn

Expertise: Head of New Subjects

Jenna studied at Cardiff University before training to become a science teacher at the University of Bath specialising in Biology (although she loves teaching all three sciences at GCSE level!). Teaching is her passion, and with 10 years experience teaching across a wide range of specifications – from GCSE and A Level Biology in the UK to IGCSE and IB Biology internationally – she knows what is required to pass those Biology exams.