TOPIC: Policy Options on Income Inequality and Poverty: Areas of Intervention

Explain the "FOUR AREAS OF INTERVENTION" (shown in the photo below) and give example of each number.

1. Altering the functional distribution - the returns to labor, land, and capital as determined by factor prices, utilization levels, and the consequent shares of national income that accrue to the owners of each factor. 2. Mitigating the size distribution - the functional income distribution of an economy translated into a size distribution by knowledge of how ownership and control over productive assets and labor skills are concentrated and distributed throughout the population. The distribution of these asset holdings and skill endowments ultimately determines the distribution of personal income. 3. Moderating (reducing) the size distribution at the upper levels through progressive taxation of personal income and wealth. Such taxation increases government revenues that decrease the share of disposable income of the very rich revenues that can, with good policies, be invested in human capital and rural and other lagging infrastructure needs, thereby promoting inclusive growth. (An individual or family's disposable income is the actual amount available for expenditure on goods and services and for saving.) 4. Moderating (increasing) the size distribution at the lower levels through public expenditures of tax revenues to raise the incomes of the poor either directly (e.g., by conditional or unconditional cash transfers) or indirectly (e.g., through public employment creation such as local infrastructure projects or the provision of primary education and health care). Such public policies raise the real income levels of the poor above what their personal income levels would otherwise be, and, as will become clear in later chapters, can do so sustainably when they build the capabilities and assets of people living in poverty