3250:200 Lecture Notes - Lecture 20: Redistribution Of Income And Wealth, Economic Mobility, Marginal Utility
16 Nov 2017
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Document Summary
Even in the absence of discrimination, the income distribution in a market economy may not be equitable or otherwise desirable. Indicators of inequality and poverty, philosophies about income redistribution, policies designed to help the poor. Inequality is linked to more poverty, crime, poor, health outcomes. Problems measuring inequality: in-kind transfers - assistance that takes the form of g and s rather than cash. Omitted from measures of inequality and poverty, biasing them upward: the life cycle - the regular pattern of income variation over a person"s life. People can borrow and save to offset life cycle changes in income. Life cycle income variation causes inequality in income but not inequality in living standards: transitory vs. permanent income, economic mobility temporarily poor and the persistently poor. People can borrow and save to smooth out transitory income uctuations. A better measure of inequality in living standards would be based not on current income, but on permanent income, a person"s normal income.
