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determining whether an equal income distribution is fair or not

What problems arise in determining whether an equal income distribution is fair or not? What is the difference between income and wealth?

What are the factors that influence the elasticity of the market supply of labor?

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Most estimates of the income distribution are done in the way, which suggests that most estimates considerably overstate actual inequality.

A similar problem arises when one tries to figure out whether some particular program, such as social security, redistributes from the rich to the poor or from the poor to the rich. To see how the problem arises, we will start by considering a social security program that has no redistribution effect at all; everyone gets back just what he paid in, plus accumulated interest. (This is not the way the real social security system works.) Since payments are made when we are employed and benefits received when we are retired, payments are made by someone with a higher income than the person who receives the benefits--not because the money is going from rich to poor but because it is going from the person when he has a higher income to him in a later year when he has a lower income. If you look at a cross section of the population, it appears that social security redistributes from rich to poor--the people who are paying are richer than those receiving--even though, in this case, there is no redistribution at all.

It is not clear what the distributional effect of the real social security system is; it may actually redistribute from lower to higher income workers. The higher income worker typically starts working--and paying in--at an older age, which reduces his total payments, and lives longer, which increases his total benefits. Whether other ...

Solution Summary

The solution discusses whether an equal income distribution is fair or not. The factors the influence the elasticity of the market supply of labor is examined.

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