The Distribution of Income Among Households

1
The Distribution of Income Among Households
2
Who is Poor?
3
Poverty Rate (1960-2004)
4
Measuring Poverty

• Poverty line

5
Implications for Income Inequality
0
This is the net gain to society
Paul gains this much utility
Pauls marginal utility
Peters marginal utility
e
f
Peter loses this much utility
d
c
Take ab from Peter and give to Paul
Social welfare maximized
MUPeter
MUPaul
Pauls income
Peters income
0
0
a
b
I
Pauls income
Peters income
6
In-kind Transfers
H
Other goods per month
420
E3
340
A
F
U
300
E1
260
B
D
20
150
210
60
of food per month
7
In-kind Transfers
H
Other goods per month
420
A
F
300
E5
168
E4
136
B
D
82
150
210
126
of food per month
8
Reasons for In-Kind Transfers

• Paternalism
• Commodity egalitarianism
• Reduce welfare fraud
• Political factors