Chapter 20 Econ 201

children are more likely than average and the elderly are less likely than average to live in poverty

T

in the united states, the top fifth of the income distribution earns

a little more than twelve times what the bottom fifth earns

permanent income

a persons normal income

negative income tax

a tax system that collects revenue from high income households and gives transferrers to low income households

poverty line

an absolute level of income set by the fed govt for each family size below which a family is deemed to be in poverty

b/c people's incomes vary over the life cycle and bc there are transitory shocks to people's income, the standard measures of income distribution

exaggerate the inequality of living standards

because in-kind transfers are not accounted for in standard measures of income distribution, the standard measures of income distribution

exaggerate the inequality of living standards

the greatest advantage of a negative income tax is that

it generates a smaller disincentive to work than most alternative antipoverty programs

since 1935, the income distribution in the US has

narrowed slightly from 1935-70 and then widened slightly from 70-today

what is the earned income tax credit most closely related to

negative income tax

if people can borrow and lend to perfectly smooth out their lifetime living standards, then

permanent income is a good measure of the distribution of living standards

Poverty rate

the % of the population whose family income falls below an absolute level called the poverty line

life cycle

the regular pattern of income variation over a person's life

the poverty line is set at

three times the cost of providing an adequate diet

In-kinds transfers

transfers to the poor given in the form of goods and services rather than cash

an increase in the minimum wage will cause a relatively large increase in unemployment amost

unskilled workers if the demand for labor is relatively inelastic