Paper Example on Economic Inequality in Cambodia

Introduction

Economic development is the process by which a country increases the social, political and economic well-being of the citizens. It involves the transition of a society to a technology-based economy from agricultural based economy. It also entails the formulation of the new technologies that improves productivity of the country. Economic development also involves the improvement of the people's living standards in a country. However, achieving economic development in low or middle-income countries faces different challenges. Economic inequality is one of the primary challenges experienced by the nations in the process of developing the economy. Economic inequality refers to the difference in economic well-being among the various groups, individuals and organizations in a country. It relates to wealth gap, wealth inequality and income inequality in the country. Economic disparity in the low-income countries occurs in three metrics such as income, wealth and consumption. Cambodia is a lower-middle income economy that greatly experiences high levels of inequality (Ferreira, Filmer & Schady, 2017). The standards of living in Cambodia have increased in the recent years but still experiences high levels of inequality. The gap between rich and the poor in the country keeps increasing affecting the economic development goals. According to Oxfam international organization, global inequality increases global poverty. The International Monetary Fund (IMF) observes that economic inequality is an issue of justice and fairness and prevents effective development. Economic inequality is the primary hindrance of sustainable development in Cambodia.

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Income inequality is the primary challenge facing economic development in Cambodia. Distribution of income in the country is unfair creating a huge gap in income. The income distribution mainly favors the rich while the poor are very disadvantaged. Income distribution plays a fundamental role in the development of the economy. According to the International Monetary Fund, unequal distribution of income affects the economic stability of households in Cambodia. It also affects the consumption trends in the country. Income generations among the poor groups in the society are very disadvantaged and affect the economic well-being of the people in the country. Ownership of resources in Cambodia is not equitably distributed. Primarily, the rich own the resources in the country while the poor mainly work for the rich people. Disparity in income distribution in the country also affects the purchasing power of the greater percentage of the Cambodia population (Mideros, Gassmann & Mohnen, 2016). Purchasing power of the population significantly influences the investment projects in the country. Economic development depends on the return on investments experienced in every country. Increased purchasing power among the citizens of Cambodia positively improves the rate of investments. According to the report by the World Bank, both the rural and urban areas in Cambodia exhibit huge gaps in consumption rates. The Asian Development Bank also observes high rate of disparity between the poor and the rich in the Cambodian urban societies. The greater percentage of the Cambodia population exists at the bottom line of the income distribution. According to the Asian Development Bank, Cambodia would experience a steady rise in the population rates in case of natural disasters and external shocks occurrence since such events would affect the majority of the population. The following graphs show the level of economic inequality in Cambodia according to the report by Asian Development Bank and World Bank.

The Gini Index also indicates the statistical dispersion in Cambodia. It depicts wealth and income distribution in the country. It measures Cambodia's level of inequality. The graphs below show the Gini Index of Cambodia.

Labor markets outcome is also a factor that affects economic development in Cambodia. Improper regulation of labor market outcomes leads to inequality in the economy. The determination of wages in the Cambodia market causes economic inequality. The information in the Cambodia market is unevenly distributed affecting the participation of firms in the market. The uneven distribution of information in the market affects the rate of investment and output of industries in the economy. It affects the sustainability of the companies and leads to the unemployment in the economy. The Cambodia economy also exhibits unequal opportunities to acquire skills and education required in the market. The unequal distribution of the skills and knowledge in the market affects the labor trends and leads to market failure. The wages of the workers in the Cambodia market operates as the function of the skill's market price (Ferreira et al., 2017). The high rates of economic inequality increase entrepreneurship rate in Cambodia at the individual level. It negatively affects the economic development rates in the country.

Taxation rates in Cambodia also affect the economic development rates in the country. In Cambodia, increase in the taxable base increases the rate of tax. The top tax rate level in the country directly affects inequality levels in the society. It increases the inequality rates in the country. The change in the tax regimes in the country has always affected the inequality rates in the country and negatively affected the economic development rates in the country. To achieve equitable economic development, a country should highly tax the rich as compared to the poor groups in the society. However, the taxation rates in Cambodia do not protect the poor. It exposes the poor groups in the society. It leads to inequitable economic well-being among the citizens of the country. The difference in the household income in Cambodia is also a major cause inequality in Cambodia. It affects the economic well-being in Cambodia. The inequality in household earnings in Cambodia affects the economic development rates. The inequality also affects the disposable income for the households in the economy. It affects the purchasing power of the households and the return for both public and private investments in the country.

Industrialization and development affect the stability of a country. The gap between the poor and the rich in Cambodia results in inequality in the country. According to the International Monetary Fund, increased inequality is harmful to the sustainability of Cambodia's economic development. Inequality causes political instability in the country. The political power and opportunities only depend on the rich groups in the society. The rich occupy the most influential leadership positions in the country. The rich to help them generate income mainly manipulate the poor. Inequality also leads to a less inclusive society. The escalating rates of inequality in Cambodia create a gap that affects the economic development in the country (Hong & Them, 2015). The country also experiences large social costs because of the inequalities.

Conclusion

The public trust is significantly down in the country. The public does not trust government institutions due to the increasing the rates of inequality in the country. Inequality leads to the failure of the political systems. It also leads to the instability of the country's economic systems. Politics greatly affect the market. To promote inclusive growth and attain economic development, Cambodia should generate and equally distribute opportunities and resources. The country should also distribute resources equitably that benefit the entire country. The country should also reduce the gap between the rich and the poor in the society. The tax regimes in the country should highly charge the rich while subsidize for the poor. Reforming the institutional and political institutions would also rebuild the trust of the public on the government. It would increase the public participation in the development projects.

References

Brickell, K., & Springer, S. (2017). Introduction to contemporary Cambodia. The Handbook of Contemporary Cambodia.

Ferreira, F. H., Filmer, D., & Schady, N. (2017). Own and sibling effects of conditional cash transfer programs: Theory and evidence from Cambodia. In Research on Economic Inequality: Poverty, Inequality, and Welfare (pp. 259-298). Emerald Publishing Limited.

Hong, R., & Them, R. (2015). Inequality in access to health care in Cambodia: socioeconomically disadvantaged women giving birth at home assisted by unskilled birth attendants. Asia Pacific Journal of Public Health, 27(2), NP1039-NP1049.

Mideros, A., Gassmann, F., & Mohnen, P. (2016). Estimation of rates of return on social protection: ex-ante microsimulation of social transfers in Cambodia. Journal of Development Effectiveness, 8(1), 67-86.