2. Chapter 20 – Income distribution and poverty

3. Income distribution in a market economy Determined by markets

4. Income distribution in a market economy Determined by markets Affected by initial endowments Estate tax (“death tax”)

5. Lorenz curve

6. Differences in income inequality

7. Poverty programs Cash transfers In-kind transfers

8. 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.

9. Tax structures Progressive – T/Y rises as Y rises

10. Tax structures Progressive – T/Y rises as Y rises Proportional – T/Y is constant

11. 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)