This slide is for reference only. do not share it to anyone. This slide is base on the book Microeconomics by McConnell and Brue, 12th and 14th edition.

1. GENERAL
PRINCIPLES OF
INCOME
DISTRIBUTION

2. PERSONAL INCOME
DISTRIBUTION
the distribution of income based on
persons or households who
participated in the generation of the
national income.

3. INCOME DISTRIBUTION
Income distribution is the smoothness or
equality with which income is dealt out among
members of a society. If everyone earns
exactly the same amount of money, then the
income distribution is perfectly equal. If no one
earns any money except for one person, who
earns all of the money, then the income
distribution is perfectly unequal. Usually,
however, a society's income distribution falls
somewhere in the middle between equal and
unequal.

4. TRENDS IN INCOME INEQUALITY
Income Inequality
- the unequal distribution of
economy’s total income among persons or
families in the economy

5. CAUSES OF GROWING
INEQUALITY
1. Greater demand for highly skilled
workers
2. Demographic changes
3. International trade, immigration,
decline in unionism

6. THE LORENZ CURVE
The Lorenz curve is a graph of the
percentage of total income obtained by
cumulative percentages of families. It is a
convenient means of visualizing the degree of
income inequality. Specifically, the area between
the diagonal (the line of perfect equality) and the
Lorenz curve represents the degree of inequality
in the distribution of total income.

7. LORENZ CURVE
Lorenz curve
(actual
distribution)
a
b
c
d
e
Perfect equality
Complete
inequality
20 40 60 80 100
Percent of income
Percentage of
families
f
100
80
60
40
20
0

8. INCOME MOBILITY
Economic mobility is the ability of an
individual, family or some other group to
improve (or lower) their economic status —
usually measured in income. Economic
mobility is often measured by movement
between income quintiles. Economic mobility
may be considered a type of social mobility,
which is often measured in change in income.

9. GOVERNMENT REDISTRIBUTION,
One of the basic functions of the
government is to redistribute income.
Government significantly redistributes
income from higher – to lower – income
households through its taxes and transfer.

10. THE IMPACT OF GOVERNMENT TAXES
AND TRANSFERS ON INEQUALITY
20 40 60 80 100
Percent of income
Percentage of
families
100
80
60
40
20
0
Lorenz curve
after taxes and
transfers
Lorenz curve
before taxes
and transfers

11. CAUSES OF INCOME INEQUALITY
1. Ability Differences
2. Education and Training
3. Discrimination
4. Tastes and Risks
5. Unequal Distribution of Wealth
6. Market Power
7. Luck, Connections, and Misfortunes

12. EQUALITY VERSUS EFFICIENCY

13. THE CASE FOR EQUALITY: MAXIMIZING
TOTAL UTILITY
In any time period, income receivers spend
their first dollars received on products they
value most–products whose marginal utility is
high. As their most pressing wants become
satisfied, consumers then spend additional
dollars of income on less important, lower-marginal-
utility goods.

14. THE CASE FOR EQUALITY: MAXIMIZING
TOTAL UTILITY
MUA
Utility
gain
Marginal
utility
MUB
Utility loss
Marginal
utility
b’
G L
a
a’
0
$2500 $5000
b
0
$5000 $7500
Income
(a)
Income
(b)

15. THE CASE FOR INEQUALITY:
INCENTIVES AND EFFICIENCY
The tax and transfer process of income
diminishes the income rewards of high-income
person and raises the income rewards of low-income
person; in so doing, it reduces the
incentives of both to earn high incomes.

16. THE EQUALITY AND EFFICIENCY
TRADEOFF
Economic Efficiency
- The relationship between the input of
scarce resources and the resulting output of a
good or service
Equality vs. Efficiency Tradeoff
- the decrease in economic efficiency that
appears to accompany a decrease in income
inequality; the presumption that an increase in
income inequality is required to increase.

17. THE ECONOMIC OF POVERTY

18. POVERTY
Poverty is a condition in which a person
or family does not have the means to
satisfy basic needs for food, clothing
shelter, and transportation.

19. INCIDENCE OF POVERTY
Poverty incidence is the proportion of
population whose annual per capita income
falls below the per annual per capita
poverty threshold to the total number of
population.

20. POVERTY TRENDS (IN PHILIPPINES)
 Philippines' poverty line marks a per capita income of
16,841 pesos a year. According to the data from the
National Statistical Coordination Board, more than
one-quarter (27.9%) of the population fell below the
poverty line the first semester of 2012, an approximate
1 per cent increase since 2009.
Poverty incidence among Filipinos eased to 24.9
percent in the first semester of 2013, from 27.9 percent
posted in the same period in 2012, the local statistics
agency said today.

21. POVERTY TRENDS (IN PHILIPPINES)
The Philippine Statistics Authority (PSA) said in a
report that poverty incidence among Filipino families
also slowed to 19.1 percent in January to June 2013,
from 22.3 percent recorded in the same period in
2012.
 "The faster growth of poor households' income
compared with the slower increase of basic commodity
prices implies a robust increase in real incomes of the
poor, which played a significant role in reducing
poverty during the period," said Balisacan.

22. THE INCOME MAINTENANCE
SYSTEM

23. SOCIAL INSURANCE PROGRAMS
SSS (Social Security System)
- is a social insurance program for workers in the
Philippines. It is a government agency that provides
retirement and health benefits to all enrolled employees
in the Philippines. Members of the SSS can also make
'salary' or 'calamity' loans. Salary loans depend on the
monthly salary of the employee. Calamity loans are for
such times when there is a calamity that has been so
declared by the government, in the area where the SSS
member lives, such as flooding, earthquake and natural
disasters.

24. SOCIAL INSURANCE PROGRAMS
Unemployment compensation
- money that substitutes for wages or
salary, paid to recently unemployed workers
under a program administered by a government
or labor union.

25. PUBLIC ASSISTANCE PROGRAM
Pantawid Pamilyang Pilipino Program (4P’s)
- a conditional cash transfer program of the
Philippine government under the DSWD. It aims
to eradicate extreme poverty in the Philippines
by investing in heath and education particularly
in ages 0–14. It is patterned on programs in
other developing countries like Brazil (Bolas
Familia) and Mexico (Oportunidades).

26. PUBLIC ASSISTANCE PROGRAM
The Philippine Health Insurance
Corporation (PhilHealth) was created in 1995
to create a universal health coverage for the
Philippines. It is a tax-exempt, government-owned
and government-controlled corporation
(GOCC) of the Philippines, and is attached to
the DOH.