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Topics: Household income in the United States, Economic inequality, Income distribution Pages: 16 (6034 words) Published: June 4, 2013
Foreign Trade University
International Economics Faculty

Public economics assignment
Income inequality in United states since 1970s

Lecturer: Msc.Ly Hoang Phu

Hoàng Ngọc Lan Chi| 1001060022|
Phan Thị Huyền Trang| 1001011015|
Phạm Thị Hương Liên| 1001060080|
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Hanoi, March 2013

I.Overview of income inequality in US since 1970s4
1.Definition and characteristic of income inequality in US4 1.1. Definition of income inequality4
1.2.Characteristic of income inequality in US since 1970s5
2. Facts of income inequality in US since 1970s6
II.Causes and effects of income inequality in US8
1. Causes of income inequality8
2. Effects of income inequality in US since 1970s10
2.1 Effects on economy10
2.2 Effects on society12
2.3Effects on politics17
III.Policies issued to reduce income inequality and their effects in the U.S. during the period from 1970s18
1.“Effective tax rate”18
2.Tax cuts return19
3.Other policies19

Inequality has always been a part of the United states economy, but the gap between the rich and the poor has recently been widening at an alarming rate. Today, more than 40 percent of total income is going to the wealthiest 10 percent, their biggest share of the nation's pie in at least 65 years. The social and political repercussions of this disparity have been widely debated. Oddly, despite its position in the political debate, the question has received little attention from economists. Mostly, they have focused on measuring income inequality and establishing its causes. Some research has been done, however, and the results, including insights from related disciplines like psychology and political science, are disturbing. This report, therefore, will specify in analyzing United states, one of developed countries having high inequality in income in a simple way to bring out the main causes and effects of income inequality as well as our recommendations to solve this problem. Moreover, we will focus on the period from 1970s in which the effects of income inequality was manifested significantly. And last but not least, we would like to thank Mr. Ly Hoang Phu for his instructions for our report.

I. Overview of income inequality in US since 1970s
1.Definition and characteristic of income inequality in US
1.1. Definition of income inequality
First of all, we should clarify the definition of income inequality. Income inequality is The unequal distribution of household or individual income across the various participants in an economy. Income inequality is often presented as the percentage of income to a percentage of population. For example, a statistic may indicate that 70% of a country's income is controlled by 20% of that country's residents. It is often associated with the idea of “income fairness”. It is generally considered “unfair” if the rich have a disproportionally larger potion of a country’s income compared to their population. Income distribution has always been a central concern of economic theory and economic policy. Classical economists such as Adam Smith, Thomas Malthus and David Ricardo were mainly concerned with factor income distribution, that is, the distribution of income between the main factors of production , land, labor and capital. It is often related to wealth distribution although separate factors influence wealth inequality. Modern economists have also addressed this issue, but have been more concerned with the distribution of income across individuals and households. Important theoretical and policy concerns include the relationship between income inequality and economic growth. The article economic inequality  discusses the social and policy aspects of income distribution questions. Income inequality, as calculated by the GINI index (a standard...

References: Jason Furman, 1998, Joseph E. Stiglitz, Economic Consequences of Income Inequality, Proceeding.
Karen Rowlingson, 2011, Does Income Inequality cause health and social problem?, Joseph Rowntree Foundation.
Oded Galor, 2004, Omer Moav, From Physical to Human Capital Accumulation: Inequality and the Process of Development, The review of Economic Studies.
Kuznet, S
Luigi Pasinetti, 1962, Rate of Profit and Income Distribution in Relation to the Rate of Economic Growth, The review of Economic Studies.
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