Economics 282
Fall 2000
B. Ferguson

Read: Articles by Ted Schmidt, Marc Breslow, and Randy Albelda and Chirs Tilly in the course packet. Also read Krugman, Chapter 2, and Mankiw, section 3-2 on the division of national income (on reserve).

Group 5:

"Unnecessary Evil: Why Inequality is Bad for Business," Randy Albelda and Chris Tilly

1.	What is the Kuznets’ view on the relationship between distributional equity and economic growth? What are the stages? What are the policy implications?
2.	What is the Okun view on the relationship between distributional equity and economic growth? How might (or has) Okun’s tradeoff be applied to policy?
3.	Consider what Krugman says about trends in equality during the 1950-1970 period and the 1970-1990 period. Do these trends support either the Kuznets’ argument or the Okun argument?
4.	What data do Albelda and Tilly use indicate about the relationship between equality and growth? Give some examples.
5.	Give the reasons for this relationship.
6.	Can you relate the distribution model in the text to any of this?

Group 1:

"The Racial Divide Widens," Marc Breslow

1.	Summarize Breslow’s data on trends in the racial distribution of income.
2.	Note the trends in human capital. What is their significance? What does the Bound and Freeman study say on this subject?
3.	What is the relationship between relative position of African-Americans (vis a vi whites) and the business cycle? Regional levels of unemployment?
4.	What does the Bound and Freeman study say on the relationship between various economic variables and the relative earnings of African-Americans?
5.	Are their implications of your answers to 3 and 4 on the relationship between equality and growth discussed under B?
6.	What does he find in the Bound and Freeman, Urban Institute and Moss and Tilly reports?
7.	What does Breslow conclude about the role of racism and discrimination?

Group 2:

"Why Have Savings Fallen," Ted Schmidt

1.	What has been the trend in savings rates in the US economy since 1981?
2.	Look at Table B-30 from the Economic Report of the President. Make a chart showing the personal savings rate for the years 1960, 1965, 1970 . . . 1995. What do you notice? Is this consistent with Schmidt’s data?
3.	Look at the table on p. 35 (of Schmidt). Comparing the two periods shown,
	a.	What has happened to income shares of each quintile? Is this consistent with what Krugman finds?
	b.	What has happened to the savings rates of each quintile between the two periods?
4.	Why have these trends occurred? What do these changes have to do with Dusenberry’s relative income hypothesis?
5.	What does Schmidt conclude? Do you think Schmidt’s conclusion is consistent with Albelda and Tilly’s argument?

Groups and Class:

Think of the following questions about Krugman:

1.	How does he measure income distribution? What groups are used? What are the trends for the tails of distribution as opposed to the middle?
2.	How significant are these developments? Why?
3.	What are the causes of these trends? Consider each group in the distribution.
4.	What does Krugman have to say about the relationship between policy and the widening gap -- either as a cause of the gap, or as a potential remedy?
5.	What is the relationship between the causes of distributional change noted by Krugman and the model of income distribution in Mankiw? How much of the change in distribution can be accounted for by the equation at the bottom of p. 54 in Mankiw?

Group 3 and 4

Questions

Think of at least one question to ask each of the other three groups. Questions must directly relate to the readings.

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