Distribution of Income Who has all the Money?. Income Distribution Free markets focus on EFFICIENCY not EQUALITY United States has enormous wealth but.

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Presentation transcript:

Distribution of Income Who has all the Money?

Income Distribution Free markets focus on EFFICIENCY not EQUALITY United States has enormous wealth but tremendous inequality –record gap between the very rich and the very poor

Median Income Per Person$26,000 Per Household:$43,000

Median & Average Income Imperfect measures of financial picture Average IncomeMedian Income

Lorenz Curve Line of Income Equality Gini Coefficient

Lorenz Curve Summary Lorenz Curve accurately measures distribution of income –Gini Index measures shape of curve A Gini Index index of 0 (zero) means perfect EQUALITY As the Gini Index increases from 0  1 inequality increases

USA Distribution of Income Widens 2006 Gini Index:.46

The 1990’s in America The RICH get RICHER

U.S. Gini Index in Comparison U.S.A..46 Japan.26 Germany.32 France.33 Bolivia.58 Brazil.59

Lorenz Curve Review Gini Coefficient Line of Income equality France:.34 USA:.46

French Labor Market

What is Income? What is Wealth?

Gini Index of WEALTH USA.85 equality

Wealth vs. Income Top 20% has 84% of Wealth Top 20% has 50% of Income Top 1% has 39% of Wealth Top 1% has 15% of Income Numbers YOU should know for TEST Bottom 40% has less than 1% of wealth

CEO Pay 2004 average 9.8 million 12% increase vs. 3.6% for workers 300 times average worker

Wealth or Income? "Ultimately, we are interested in the question of relative standards of living and economic well-being. We need to examine trends in the distribution of wealth, which, more fundamentally than income, represents a measure of the ability of households to consume." Alan Greenspan