ECON 1200 Chapter Notes - Chapter 20: Political Philosophy, Economic Mobility, Negative Income Tax
1 May 2016
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Chapter 20: bottom fifth of families in us earned about 4% of total income in us while top fifth of families in us earned about 49% of total income in us in 2011. In-kind transfers: transfers to poor given in form of goods & services rather than cash. Standard measurements of degree of inequality don"t account for in-kind transfers b/c measurements of income distribution & poverty rate based on money income: economic life cycle. Life cycle: regular pattern of income variation over person"s life. Young worker has low income & income rises as worker gains maturity & experience, peaking around 50 & falls sharply when worker retires at around. Normal life cycle pattern causes inequality in annual income distribution, but doesn"t necessarily represent true inequality in living standards: transitory vs. permanent income. Distribution of permanent income more relevant than distribution of annual income b/c people base consumption on permanent income.
