Income Inequality and Poverty

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CHAPTER THIRTY-FOUR INCOME INEQUALITY AND POVERTY CHAPTER OVERVIEW The statistical information, analytical concepts, and discussions of public policy alternatives can help students find their way through the maze of controversial topics and issues concerning income distribution and poverty. The chapter begins by surveying some basic facts concerning the distribution of income in the United States and the Lorenz Curve that gives a graphic representation of the distribution. Next, the major causes of income inequality are considered, as well as historical trend information. Third, the debate over income inequality and the tradeoff between equality and efficiency implied by this debate is examined. Fourth, the poverty problem in America is analyzed. Finally, the social insurance programs and new public-assistance programs are outlined and discussed. WHAT’S NEW That chapter has been reorganized. The section on the historical trends in inequality and the causes of these trends is now discussed after the general discussion of the causes of income inequality. The maximum income level at each quintile has been added to Table 34.2. Table 34.4 has been expanded to include the earned income credit. The discussion on welfare reform has been revised to include effects of the Personal Responsibility Act of 1996. The Last Word is new. One of the Web-Based Question is new the other has been revised. INSTRUCTIONAL OBJECTIVES After completing this chapter, students should be able to: 1. Describe the distribution of income in the United States by personal income categories by families and quintile distribution by families. 2. Explain how a Lorenz curve is used to describe income inequality. 3. Discuss the impact of income mobility on income distribution data. 4. Explain the broadened concept of income, which includes the effects of taxes and

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