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MODULE 78

Income Inequality and Income Distribution

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78Income Inequality and Income Distribution

In this Module, you will learn to:

The descriptive positive branch of economics offers information about the extent of poverty and income inequality. Normative questions about how to weigh equity in the distribution of income against associated losses in efficiency present greater challenges. For example, the redistribution of income from the rich to the poor reduces income inequality, but the taxes used to collect money for the poor generally cause deadweight loss. How much income redistribution is appropriate? That is a subject of debate, and although there may not be a single “right” answer, the tools of economics do much to inform the debate. In this module, we look at the problem of poverty and the issue of income distribution, and learn how public policy can affect them.