Lecture 31 - Announcements HW for ch 16 due tonight Do...

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Announcements HW for ch. 16 due tonight! Do experiment prep for Friday. Friday – experiment HW for ch 17 due next Monday (during break) These slides are for today and Wednesday (I may post a few more for Weds). 1 of 38
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2 of 38 CH 18: INCOME DISTRIBUTION AND POVERTY equity Fairness. Why do some people get more than others? What are the sources of inequality? Should the government change the distribution generated by the market?
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Income distribution in the US Suppose your heights was proportional to your income: Very poor would be about 3 inches tall. Average=5’7” 18’ tall: lawyers and doctors. 50-60’ tall: successful business people 1000-2000’ tall: CEOs. Bill Gates = approx. 8-9 miles tall. And that’s just income, wealth is worse. At one point, Bill Gates had as much wealth as the poorest 40% of the US! 3 of 38
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4 of 38 THE DISTRIBUTION OF INCOME INCOME INEQUALITY IN THE UNITED STATES Distribution of Total Income and Components in the United States, 2000 (Percentages) HOUSEHOLDS TOTAL INCOME LABOR INCOME PROPERTY INCOME TRANSFER INCOME Bottom fifth 2.7 1.7 0.7 19.2 Second fifth 7.2 6.3 4.2 25.8 Third fifth 12.6 12.7 9.2 23.0 Fourth fifth 21.3 23.6 15.1 17.0 Top fifth 56.7 55.6 73.2 14.8 Top 1 percent 14.8 10.9 31.6 1.2 Source: Julie-Anne Cronin, US Department of the Treasury, OTA Paper 85, pg 19.
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5 of 38 THE DISTRIBUTION OF INCOME Changes in the Distribution of Income Distribution of Money Income of U.S. Families by Quintiles, 1947–2000 (Percentages) 1947 1960 1972 1980 1984 1994 1997 2000 Bottom fifth 5.0 4.8 5.4 5.2 4.7 4.2 4.2 4.2 Second fifth 11.8 12.2 11.9 11.5 11.0 10.0 9.9 9.7 Third fifth 17.0 17.8 17.5 17.5 17.0 15.7 15.7 15.5 Fourth fifth 23.1 24.0 23.9 24.3 24.4 23.3 23.0 23.0 Top fifth 43.0 41.3 41.4 41.5 42.9 46.9 47.2 47.6 Top 5% 17.2 15.9 15.9 15.3 16.0 20.1 20.7 20.8 Source: Statistical Abstract of the United States , various editions; Department of Commerce, HHES Division.
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Share of aggregate household income by quintile: 1970, 1980, 1990, and 2005 6
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7 of 38 THE DISTRIBUTION OF INCOME Differences among African-American Households, White Households, and Single-Person Households Distribution of Money Income of Households, 2002 (Percentages) ALL HOUSEHOLDS AFRICAN- AMERICAN HOUSEHOLDS WHITE HOUSEHOLDS HISPANIC HOUSEHOLDS ONE-PERSON HOUSEHOLDS 0-15,000 16.1 27.4 14.5 19.1 36.3 15-25,000 13.2 16.4 12.8 17.2 19.8 25-35,000 12.3 14.5 12.0 15.7 13.7 35-50,000 15.1 14.8 15.2 16.4 13.4 50-75,000 18.3 13.9 18.9 16.9 9.7 75,-100,000 11.0 6.7 11.6 7.5 3.7 >100,000 14.1 6.4 15.0 7.2 3.5 Total 100.0 100.0 100.0 100.0 100.0
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8 of 38 THE DISTRIBUTION OF INCOME THE DISTRIBUTION OF WEALTH Percentage of Different Assets Owned by Households, 1998 Survey of Consumer Finances PERCENTAGE OF OWNERS COMMON STOCK EXCLUDING PENSIONS ALL COMMON STOCK NONEQUITY FINANCIAL ASSETS HOUSING EQUITY NET WORTH Top .5% 41.4 37.0 24.2 10.2 25.6 Top 1% 53.2 47.7 32.0 14.8 34.0 Top 10% 91.2 86.2 72.2 50.7 68.9 Bottom 80% 1.7 4.1 14.0 29.3 18.5 Source: James Poterba, “Stock Market Wealth and Consumption,” Journal of Economic Perspectives, 14(2), 99 – 118 , Spring 2000.
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9 of 38 THE DISTRIBUTION OF INCOME Lorenz curve A widely used graph of the distribution of income, with cumulative percentage of families plotted along the horizontal axis and cumulative percentage of income plotted along the vertical axis.
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