Chapter 15: Q.33 (page 378)
Explain how you would create a government
program that would give an incentive for labor to
increase hours and keep labor from falling into the
poverty trap.
By reducing welfare payments by Government
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Who is included in the top income quintile?
Identify some public policies that can reduce the
level of economic inequality.
The poverty rate would be substantially lower if the market value of in-kind transfers were added to family income. The largest in-kind transfer is Medicaid, the government health program for the poor. Lets say the program costs \(10,000 per recipient family.
a. If the government gave each recipient family a \)10,000 check instead of enrolling them in the Medicaid program, do you think that most of these families would spend that money to purchase health insurance? Why? (Recall that the poverty level for a family of four is about $25,000.)
b. How does your answer to part (a) affect your view about whether we should determine the poverty rate by valuing in-kind transfers at the price the government pays for them? Explain.
c. How does your answer to part (a) affect your view about whether we should provide assistance to the poor in the form of cash transfers or in-kind transfers? Explain.
Suppose there are two possible income distributions in a society of ten people. In the first distribution, nine people would have incomes of \(30,000 and one person would have an income of \)10,000. In the second distribution, all ten people would have incomes of $25,000.
a. If the society had the first income distribution, what would be the utilitarian argument for redistributing income?
b. Which income distribution would Rawls consider more equitable? Explain.
c. Which income distribution would Nozick consider more equitable? Explain.
What are the main reasons economists give for the
increase in inequality of incomes?
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