Chapter 7-Income Redistribution: Conceptual Issues Public economics
1 Chapter 7 – Income Redistribution: Conceptual Issues Public Economics
Introduction Will provide framework for thinking about the normative and positive aspects of government income redistribution policy
2 Introduction • Will provide framework for thinking about the normative and positive aspects of government income redistribution policy
Introduction Some questions whether economists should be concerned with distributiona Issues Value judgments embodied in the"right income distribution No scientific basis for the right distribution
3 Introduction • Some questions whether economists should be concerned with distributional issues. – Value judgments embodied in the “right” income distribution. – No scientific basis for the “right” distribution
Introduction Focus on efficiency alone has problems That focus, too is a value judgment Multiple equilbria Decision makers do care about the income distribution economic analysis ineffective if it doesnt consider this policy-maker constraint
4 Introduction • Focus on efficiency alone has problems. – That focus, too, is a value judgment. – Multiple equilbria. – Decision makers do care about the income distribution; economic analysis ineffective if it doesn’t consider this policy-maker constraint
Distribution of Income Can analyze household income and see how equally or unequally the"pie is distributed Table 7.1 shows the percentage of money income among households for more than 30 years
5 Distribution of Income • Can analyze household income, and see how equally or unequally the “pie” is distributed. • Table 7.1 shows the percentage of money income among households for more than 30 years
Table 7.1 Table 7.1 The distribtion of money income among households (selected years) Percentage shae Lowest Second Middle Fourth Highest Year ifth Fi Fifth Fifih Top 5 Percent 1967 4.0 10.8 17.3 24.2 43.8 17.5 1977 4.4 10.3 17.0 24.8 43.6 16.l 1982 4.1 10.1 16.6 24.7 44.5 16.2 1987 3.8 9.6 16.1 24.3 46.2 18.2 1992 3 94 158 4.2 46.9 18.6 1997 3.6 89 150 23.2 494 21.7 200l 3.5 8.7 14.6 23.0 50.1 22.4 SOURCE: US Bureau of the Census, Current Population Reports, series P60-209( Washington, DC: US Govern mentPrintingOffice),2001,Url:http://www.census.govhhes/income/histinc/h02.htmlThesefiguresdonot include the value of in-kind transfers
Table 7.1
Distribution of Income Richest 20% receives about 50% of total ncome Poorest 20% receives about 4% of total Income Inequality has increased over time
7 Distribution of Income • Richest 20% receives about 50% of total income. • Poorest 20% receives about 4% of total income. • Inequality has increased over time
Distribution of income Poverty The poverty line is a fixed level of real income which is considered enough to provide a minimally adequate standard of living Inherently arbitrary, but still a useful benchmark Trends over time Differences across groups
8 Distribution of Income: Poverty • The poverty line is a fixed level of real income which is considered enough to provide a minimally adequate standard of living. • Inherently arbitrary, but still a useful benchmark. – Trends over time – Differences across groups
Distribution of income Poverty Poverty line for a family of 4 was $18, 244 in2001 Median household income more than double that, $42, 228 Table 7.2 shows poverty rates for selected groups in 2001
9 Distribution of Income: Poverty • Poverty line for a family of 4 was $18,244 in 2001. • Median household income more than double that, $42,228. • Table 7.2 shows poverty rates for selected groups in 2001
Table7.2 Table 7.2 Who is poor? Group Poverty rate Group Poverty Rate All persons 11.7% Under 18 16.3% White 7.4 65 years and older 10.1 Black 20.7 Female households Hispanic origin 194 no husband present 26.4 SourCe:UsBureauoftheCensushistOricalPovertyTables."[wwwDocumentUrl:http://www.census.gov/ prod/2002pubs/p60-219. pdf. Figures are for 2001
Table 7.2
