Income Inequality and Poverty

14 Pages Posted: 17 Nov 1998 Last revised: 10 Oct 2010

See all articles by Martin S. Feldstein

Martin S. Feldstein

National Bureau of Economic Research (NBER) (deceased); Harvard University (deceased)

Date Written: October 1998

Abstract

The first part of this paper argues that income inequality is not a problem in need of remedy. The common practice of interpreting a rise in the gini coefficient measure of inequality as a bad thing violates the Pareto principle and is equivalent to using a social welfare function that puts negative weight on increases in the income of high income individuals. The real distributional problem is not inequality but poverty. The paper considers three sources of poverty and asks what if anything might be done about each of them: unemployment; a low level of earning capacity; and individual choice.

Suggested Citation

Feldstein, Martin S., Income Inequality and Poverty (October 1998). NBER Working Paper No. w6770, Available at SSRN: https://ssrn.com/abstract=138573

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