Chapter 20 – Income distribution and poverty
Income distribution in a market economy Determined by markets
Income distribution in a market economy Determined by markets Affected by initial endowments Estate tax (“death tax”)
Lorenz curve
Differences in income inequality
Poverty programs Cash transfers In-kind transfers
Trends in income distribution Inequality decreased until 1980s Inequality rose from 1980s until mid 1990s Inequality declined in mid- and late- 1990s Inequality rose since 2000.
Tax structures Progressive – T/Y rises as Y rises
Tax structures Progressive – T/Y rises as Y rises Proportional – T/Y is constant
Tax structures Progressive – T/Y rises as Y rises Proportional – T/Y is constant Regressive – T/Y declines as Y rises (T = taxes, Y = income)