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