tailieunhanh - Lecture Economics (19/e) - Chapter 20: Income inequality, poverty, and discrimination
Chapter 20 explores the causes of income inequality, its measurement, and means by which government redistributes income to reduce poverty. The Lorenz Curve (numerically, a Gini ratio) illustrates the degree of income inequality in a country. Income inequality is caused by differences in ability, education and training, discrimination, preferences and willingness to take risks, wealth, market power, luck, connections, and misfortune. | . Income Inequality and Poverty Copyright © 2012 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin Facts About Income Inequality Average household income $66,424 in 2008 Among the highest in the world Distribution by quintiles Income mobility People change quintiles Government redistribution Taxes and transfers LO1 20- Facts About Income Inequality (1) Quintile (2) Percentage of Total Income Lowest 20% Second 20% Third 20% Fourth 20% Highest 20% Total Distribution by Quintiles, 2008 Source: Bureau of the Census, (3) Upper Income Limit $20,712 39,000 62,725 100,240 No Limit LO1 20- Facts About Income Inequality Lorenz Curve and Gini Ratio 20 40 60 80 100 20 40 60 80 100 0 Perfect Equality Lorenz Curve (Actual Distribution) Complete Inequality A B a b c d e f Gini Ratio = Area A Area A + Area B Percentage of Households Percentage of Income LO1 20- Facts About Income Inequality 20 40 60 80 100 20 40 60 80 100 0 Lorenz Curve Before Taxes and Transfers Percentage of Households Percentage of Income Lorenz Curve After Taxes and Transfers Impact of government taxes and transfers LO1 20- Causes of Income Inequality Ability Education and training Discrimination Preferences and risks Unequal distribution of wealth Market power Luck, connections, and misfortune LO2 20- Income Inequality Over Time Rising income inequality since 1970 Causes of growing inequality Greater demand for highly skilled workers Demographic changes International trade, immigration, and decline in unionism LO3 20- Equality Versus Efficiency The case for equality Maximizing total utility The case for inequality Incentives and efficiency The equality-efficiency tradeoff LO4 20- The Utility-Maximizing Distribution of Income Anderson’s Marginal Utility From Income Brooks’ Marginal Utility From Income 0 0 Marginal Utility Marginal Utility Income Income $5000 $5000 $2500 $7500 MUB MUA a a’ b’ b Utility . | . Income Inequality and Poverty Copyright © 2012 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin Facts About Income Inequality Average household income $66,424 in 2008 Among the highest in the world Distribution by quintiles Income mobility People change quintiles Government redistribution Taxes and transfers LO1 20- Facts About Income Inequality (1) Quintile (2) Percentage of Total Income Lowest 20% Second 20% Third 20% Fourth 20% Highest 20% Total Distribution by Quintiles, 2008 Source: Bureau of the Census, (3) Upper Income Limit $20,712 39,000 62,725 100,240 No Limit LO1 20- Facts About Income Inequality Lorenz Curve and Gini Ratio 20 40 60 80 100 20 40 60 80 100 0 Perfect Equality Lorenz Curve (Actual Distribution) Complete Inequality A B a b c d e f Gini Ratio = Area A Area A + Area B Percentage of Households Percentage of Income LO1 20- Facts About Income Inequality 20 40 60 80 100 20 .
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