marginal products
• differences in equilibrium wages result from
differences in
• worker characteristics:
education, experience, talent, effort
• job characteristics:
Annual family income Under $24,117
$24,117 – $42,057 $42,057 – $65,000 $65,000 – $98,200 $98,200 and over $170,082 and over
CHAPTER 20 INCOME INEQUALITY AND POVERTY
0 5 10 15 20 25 30 35
CHAPTER 20 INCOME INEQUALITY AND POVERTY
6
Hale Waihona Puke Poverty▪ Poverty line: an absolute level of income
set by the govt for each family size below which a family is deemed to be in poverty
CHAPTER 20 INCOME INEQUALITY AND POVERTY
3
The U.S. Income Distribution: 2003
Group Bottom fifth Second fifth Middle fifth Fourth fifth
Top fifth Top 5 percent
5
Inequality Around the World
South Africa Brazil
Mexico Nigeria
China Russia United States United Kingdom Canada
India Germany
Japan
Income share of the top 20% divided by income share of the bottom 20%
▪ Poverty rate: the percentage of the population
whose family income falls below the poverty line
▪ In 2003 in the U.S.,
• median family income = $52,680 • poverty line for family of four = $18,810 • poverty rate = 12.5%
20 Income Inequality and Poverty
PRINCIPLES OF
ECONOMICS
FOURTH EDITION
N. G R E G O R Y M A N K I W
PowerPoint® Slides by Ron Cronovich
© 2007 Thomson South-Western, all rights reserved
4
U.S. Inequality Over Time
14
Income share of the top 20% divided by income share of the bottom 20%
12
10
8
6
4
1930 1940 1950 1960 1970 1980 1990 2000
CHAPTER 20 INCOME INEQUALITY AND POVERTY
▪ What are some of the leading philosophies
on the proper role of government in altering the distribution of income?
▪ What policies are used to fight poverty? What are
the income distribution in a market economy may not be equitable or otherwise desirable.
▪ In this chapter, we examine
• indicators of inequality and poverty • philosophies about income redistribution • policies designed to help the poor
the problems with these policies?
CHAPTER 20 INCOME INEQUALITY AND POVERTY
1
Introduction
Recap of the previous two chapters:
• equilibrium wages equal the value of workers’
In this chapter, look for the answers to these questions:
▪ How much inequality and poverty exist in our
society?
▪ What are the problems measuring inequality?
extent to which a job is pleasant and safe
• some earnings differences due to discrimination
CHAPTER 20 INCOME INEQUALITY AND POVERTY
2
Introduction
▪ Even in the absence of discrimination,
CHAPTER 20 INCOME INEQUALITY AND POVERTY
7
U.S. Poverty Over Time
Percent of the population below poverty line
CHAPTER 20 INCOME INEQUALITY AND POVERTY