L5: Inequality and Redistribution

Question 1

how to measure differences in well-being?

Answer 1

income distribution

poverty rate

income mobility

generational mobility

mortality

Question 2

simplest measure of differences in well-being

Answer 2

distribution of annual income before taxes and transfers - distributino of market income

Question 3

gini coefficient

Answer 3

measure of inequality that incorporates everything in the income distribution

0 for complete equality and 1 for complete inequality

Question 4

lorenz curve

Answer 4

graphical representation of the distribution of income or of wealth

Question 5

poverty line

Answer 5

measure of income estimated to be necessary to allow a family to achieve a standard of living deemed minimally acceptable

looking only at the bottom of the distribution

absolute measure in the US: not what share of income is going to the poor but what share of the poor have a certain level of income

relative measure in the EU: 60% of median income
- makes sense if what is deemed acceptable changes as society gets wealthier

Question 6

factors explaining the evolution of poverty

Answer 6

increasing pre-tax inequality: stagnant wages at the bottom despite growth

increase in single-parent families

increase in female labour force participation

Question 7

poverty rate

Answer 7

assessing whether households are below the poverty line based on money income: income available to them, taking account of government taxes and transfers

doesn’t count credits and money from the system

Question 8

issues with poverty rate definition

Answer 8

definition has many weaknesses

in-kind transfers have grown substantially

payroll tax and income tax credits have grown substantially for low-income families

bundles have changed, but only food counts for measure

official CPI overstates inflation and cost of living varies across regions

Question 9

mortality

Answer 9

with income, the distribution of mortality has become more unequal