Microeconomics Income inequality
Distortion of incentives
Results from government policies to redistribute income to attain equity
negative income tax
a tax system that collects revenue from high-income households and gives subsidies to low-income households, i.e. EITC
poverty line
an absolute level of income set by the federal government for each family size below which a family is deemed to be in poverty
welfare
government programs that supplement the incomes of the needy, i.e. TANF, SSI
Increase in demand for skilled labor
explains rise in income inequality in US from 1970-2008
Invisible Hand
acts to allocate resources efficiently but not necessarily ensure fairness
Measurements of income equality uses
lifetime income not annual
Distribution of income
tends to be more equal in rich nations than poor
maximin criterion
the claim that the government should aim to maximize the well-being of the worst-off person in society
poverty rate
the percentage of the population whose family income falls below an absolute level called the poverty line
liberalism
the political philosophy according to which the government should choose policies deemed just, as evaluated by an impartial observer behind a "veil of ignorance"
utilitarianism
the political philosophy according to which the government should choose policies to maximize the total utility of everyone in society
libertarianism
the political philosophy according to which the government should punish crimes and enforce voluntary agreements, but not redistribute income
life cycle
the regular pattern of income variation over a person's life
in-kind transfers
transfers to the poor given in the form of goods and services rather than cash i.e. food stamps, medicaid