Principles of Economics- Mankiw (5th) 429

Principles of Economics- Mankiw (5th) 429 - can never be...

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CHAPTER 20 INCOME INEQUALITY AND POVERTY 441 As this example shows, there are social as well as economic determinants of the distribution of income. Moreover, the simplistic view that “income inequal- ity is bad” can be misleading. Increasing the opportunities available to women was surely a good change for society, even if one effect was greater inequality in family incomes. When evaluating any change in the distribution of income, pol- icymakers must look at the reasons for that change before deciding whether it presents a problem for society. CASE STUDY INCOME INEQUALITY AROUND THE WORLD How does the amount of income inequality in the United States compare to that in other countries? This question is interesting, but answering it is problematic. For many countries, data are not available. Even when they are, not every coun- try in the world collects data in the same way; for example, some countries col- lect data on individual incomes, whereas other countries collect data on family incomes. As a result, whenever we find a difference between two countries, we
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Unformatted text preview: can never be sure whether it reflects a true difference in the economies or merely a difference in the way data are collected. With this warning in mind, consider Table 20-3, which compares the income distribution of the United States to that of seven other countries. The countries E QUALITY FOR WOMEN HAS MEANT LESS EQUALITY FOR FAMILY INCOMES. Table 20-3 C OUNTRY B OTTOM F IFTH S ECOND F IFTH M IDDLE F IFTH F OURTH F IFTH T OP F IFTH Germany 9.0% 13.5% 17.5% 22.9% 37.1% Canada 7.5 12.9 17.2 23.0 39.3 Russia 7.4 12.6 17.7 24.2 38.2 United Kingdom 7.1 12.8 17.2 23.1 39.8 China 5.5 9.8 14.9 22.3 47.5 United States 4.8 10.5 16.0 23.5 45.2 Chile 3.5 6.6 10.9 18.1 61.0 Brazil 2.5 5.7 9.9 17.7 64.2 I NCOME I NEQUALITY AROUND THE W ORLD . This table shows the percent of total before-tax income received by families in each fifth of the income distribution. Source: World Development Report: 1998/99, pp. 198199....
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