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Principles of Economics- Mankiw (5th) 432

Principles of Economics- Mankiw (5th) 432 - 444 PA R T S I...

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444 PART SIX THE ECONOMICS OF LABOR MARKETS annual incomes. What people care about, however, is not their incomes but their ability to maintain a good standard of living. For various reasons, data on the in- come distribution and the poverty rate give an incomplete picture of inequality in living standards. We examine these reasons below. In-Kind Transfers Measurements of the distribution of income and the poverty rate are based on families’ money income. Through various government programs, however, the poor receive many nonmonetary items, including food stamps, housing vouchers, and medical services. Transfers to the poor given in the form of goods and services rather than cash are called in-kind transfers. Standard measurements of the degree of inequality do not take account of these in-kind transfers. Because in-kind transfers are received mostly by the poorest members of soci- ety, the failure to include in-kind transfers as part of income greatly affects the measured poverty rate. According to a study by the Census Bureau, if in-kind
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