Income Distribution & Poverty



Income Distribution & Poverty

Introduction

The relationship between income distribution and poverty has been long discussed and explained by various economists. On the matter of poverty, the national income and its unequal distribution impact very much on poverty in expected ways. Though it is said that changes in national income by and large bring about changes in poverty however the changes in inequality can only change poverty only in countries with middle income and therefore change rates in poverty are not efficiently reflected in relatable change rates of alteration in inequality at low levels of income. Thus it indicates that, generally, institutional and social situations that govern the distribution dynamics across nations at lower income levels are sufficiently heterogeneous. On the other hand, in middle income nations the condition is more dynamically smooth (Majid, 2003). Hence, alterations are more commensurate here and alterations in unequal distribution relate to alterations in poverty as well. Further, research also indicates that nations with more equal income distribution grow more rapidly, but it is also true that economic policies always compensate for inferior initial distribution of income (Bigsten & Levin, 2000). Thus, it is suggested that relationship between poverty and income distribution varies a lot across nations, and the performance difference is also largely associated with the varying policy choices.

Discussion

Though the attention is now provided to income distribution inequality in the United States, there are several economists who dispute over the increasing evidence of its contribution to heightening the poverty level in the country. According to Feldestein, not all income distribution inequality implies for violating the principle of Pareto. In fact he emphasizes that most income inequality actually satisfies the principle of Pareto. This suggests that the income distribution's broadening gap because of income increases of high-income people without income decrease of others makes some individuals better off without making others worse off (Brown & Gebremedhim, 2004). The Caputo stresses that the increasing proof of income inequality has been disputed in parts due to the controversies about the proper way for evaluating changes in income distribution among the workers and families. Another scholar, Timothy Smeeding, performed a cross-national comparative study of poverty position and income inequality on several countries including America, England, Canada, Israel, Norway, Germany, and others. He collected the data from Luxembourg Income study (LIS) for the period 1979 to 1983, and used 3 different inequality measures (Gini Index, Theil, and Atkinson) of adjusted disposable income and family disposable income by adult equivalence scale. For near poverty and poverty, various family types were used. The study indicates that the rates of United States are first for all measures of income inequality for both unadjusted and adjusted incomes (Brown & Gebremedhim, 2004). Similar results were obtained for near poor and poor, where United States was the first for all the family types. It is also revealed that the single elderly and single parents with children have higher occurrences of near poverty or poverty than the other family ...