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Chap013.6 - Slide 34 Methods of Income Redistribution ±...

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6 Chapter 13: Labor Markets, Poverty, and Income Distribution Slide 31 Why is Income Inequality a Moral Problem? What would happen to the incentive to work if everyone was guaranteed an equal amount of income? Rewards for hard work and risk taking raise national income. Such rewards lead to inequality. Chapter 13: Labor Markets, Poverty, and Income Distribution Slide 32 Why is Income Inequality a Moral Problem? The inequality created by a market system may be inefficient if people would choose less inequality when choosing distributional rules from behind a “veil of ignorance.” Chapter 13: Labor Markets, Poverty, and Income Distribution Slide 33 Methods of Income Redistribution Difficulties in Developing Programs to Reduce Income Inequality z Identifying who will receive benefits z Undermining the incentive to work Chapter 13: Labor Markets, Poverty, and Income Distribution
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Unformatted text preview: Slide 34 Methods of Income Redistribution ± Welfare Payments and In-kind Transfers z Assistance to the poor includes: ² Cash transfers ² In-kind transfers Chapter 13: Labor Markets, Poverty, and Income Distribution Slide 35 Methods of Income Redistribution ± Welfare Payments and In-kind Transfers z Aid to Families with Dependent Children (AFDC) ² Federal Cash Transfer Program ² Criticisms o Created an incentive for the father to leave the household o Reduced the incentive to work Chapter 13: Labor Markets, Poverty, and Income Distribution Slide 36 Methods of Income Redistribution ± Welfare Payments and In-kind Transfers z 1996 Personal Responsibility Act ² Responsibility of welfare transferred to the states ² States receive a lump-sum payment from the federal government ² Five-year lifetime limit on receipt of benefits...
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