1. Distribution of Income
Who has all the Money?

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

3. What is Income?
What is Wealth?

4. Wealth vs. Income Top 1% has 15% of Income Top 1% has 39% of Wealth
Numbers YOU should know for Final Exam
Wealth vs. Income
Top 1% has 15% of Income
Top 1% has 39% of Wealth
Bottom 40% has less than 1% Wealth

5. Income Distribution Article
Solutions
Reasons

6. Where do YOU want to live?
Country A
Average Income = $20,000 per year
(mean income)
Country B
Average Income = $60,000 per year
(mean income)
Which country do YOU want to live in?
Population = 100,000
Each person earns $20,000
GDP = 2 billion or $20,000 per capita
Population = 100,000
400 people earn $15 million
99,600 earn $1,000 per year
GDP = 6 billion or $60,000 per capita

7. Lorenz Curve Introduction
Lorenz Curve illustrates distribution of income
A much more accurate measure than average income
Gini Index measures the degree of inequality in a Lorenz curve
Gini Index is a number between 0  1
0 (zero) means perfect EQUALITY
1 means perfect inequality
As the Gini Index increases from 0  1 inequality increases

8. Lorenz Curve Analysis France: .34 USA: .46
Line of perfect Income equality
Gini Coefficient
0 - 1
USA: .46

9. Gini Index by Country Sweden = .23 Germany = .28 England = .36
France = .32
USA = .46
Japan = .25
South Africa = .58

10. USA Distribution of Income Widens
2007 Gini Index: .46