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Inequality and Poverty When Effort Matters

Department of Economics, Georgetown University, Washington, DC 20057, USA
Econometrics 2017, 5(4), 50; https://doi.org/10.3390/econometrics5040050
Received: 25 August 2017 / Revised: 21 October 2017 / Accepted: 23 October 2017 / Published: 6 November 2017
(This article belongs to the Special Issue Econometrics and Income Inequality)
On the presumption that poorer people tend to work less, it is often claimed that standard measures of inequality and poverty are overestimates. The paper points to a number of reasons to question this claim. It is shown that, while the labor supplies of American adults have a positive income gradient, the heterogeneity in labor supplies generates considerable horizontal inequality. Using equivalent incomes to adjust for effort can reveal either higher or lower inequality depending on the measurement assumptions. With only a modest allowance for leisure as a basic need, the effort-adjusted poverty rate in terms of equivalent incomes rises. View Full-Text
Keywords: equivalent income; welfare; inequality; poverty; labor supply equivalent income; welfare; inequality; poverty; labor supply
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Ravallion, M. Inequality and Poverty When Effort Matters. Econometrics 2017, 5, 50.

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