PE Powerpoint Part BW 9

PE Powerpoint Part BW 9 - Public Economics Principles and...

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Public Economics Principles and Practice Part Nine Social Welfare and Income Redistribution Peter Abelson Applied Economics and University of Sydney
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Social Welfare and Income Redistribution Poverty and Inequality Welfare by Market Regulation Income Redistribution and Social Insurance Welfare Programs for the Workforce, Families and the Aged Health
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Chapter 28 Poverty and Inequality Distribution of Income and Wealth in Australia Measurement of Income Measures of Poverty Measures of Inequality Trends in Poverty and Inequality Causes of Unequal Incomes
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Income Distribution in Australia Table 28.1 next slide shows key income distribution statistics. Key concepts – Gross household income (includes government benefits) – Disposable household income (takes out direct taxes) Equivalised household disposable income – Percentile relationships. Equivalised household income = total household income divided by sum of equivalence points allocated to household members. The result may be viewed as an index. Percentile income ratios are lower for equivalised household income than for unadjusted income. Figure 28.1 (in text) shows distribution for equivalised household disposable income ( not actual income).
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Distribution of household income
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Distribution of wealth Wealth is distributed more unequally than income. Wealthiest 20% of households hold 59% of wealth; Poorest 20% hold 1% of wealth. Wealth is correlated with age. Most wealth is in housing and pensions. Wealth also correlated with income. But some low income households have significant assets. 20% of households with lowest equivalised disposable household income own 15% of country’s wealth.
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Measurement of Income Economists define a person’s income as the value of goods that she could consume in any period without any change in her net wealth. This includes items that are not in taxable income: e.g. imputed rents, bequests, untaxed capital gains. The period: income is measured over a period. Note lifetime income concept. Income unit: for comparative purposes, this is usually an equivalised household unit.
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Three sources of private income Labour, capital, and gifts (see Box 28.1). Income from labour Wages, salaries and cash supplements Own business enterprises, self-employment, partner ships, etc. Other employment supplements, (fringe benefits) The underground (cash) economy Household production of services.
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Measurement of income (cont.) Income from capital Property rents net of costs Interest and dividends Private pensions Real capital gains and losses from investments Imputed rents from physical capital Other private income (bequests, gifts, alimony etc.)
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Components of income
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Including government payments Government payments greatly affect final distribution of income . Direct government payments are included in figures in Table 28.1.
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PE Powerpoint Part BW 9 - Public Economics Principles and...

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