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| QUICK REVIEW 34-1 |
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- Income inequality in the United States has
increased in the last decade; currently the top fifth of all families receive 47 percent
of before-tax income
and the bottom fifth receives 4 percent.
- The Lorenz curve depicts income inequality
graphically by comparing percentages of total families and percentages of total income.
- The distribution of income is less unequal over
longer time periods.
- Government taxes and transfers significantly
reduce income inequality by redistributing income from higher- income groups to
lower-income groups; the bulk of this redistribution is from transfer payments.
- Differences in ability
education and training
tastes for market work versus nonmarket activities
property owner- ship
and market
power-along with discrimination and luck-help explain income inequality.
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| QUICK REVIEW 34-2 |
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- The fundamental argument for income equality is
that it maximizes total utility by equalizing the marginal utility of the last dollar of
income received by all people.
- The basic argument for income inequality is that
it is necessary as an economic incentive for production.
- By government standards
about 36 million people
in the United States
or 13.7 percent of the population
live in poverty.
- The U.S. income-maintenance system includes both
social insurance programs and public assistance (welfare) programs.
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