The following table shows income distribution data for 2015 and 2020 from the World Bank in Colombia and Dominican Republic respectively. Quintile Colombia Lowest 20% Second 20% Third 20% Fourth 20% Highest 20% 2015 3.8 7.9 12.5 20 55.8 2020 2.8 7.4 11.9 19.6 58.3 Dominican Republic 2020 6.2 10.7 14.9 21.7 46.5 2015 5 9.3 13.8 20.9 51 a. Given the adoption of the Sustainable Development Goals (SDGs) by the UN in September 2015, what can you say about the effect on relative income inequality in these two countries? Can it be illustrated graphically? b. Consider a 12-person economy where the individuals are employed equally across the sectors. If the modern urban wage = £8, the informal urban wage = £3, and the tradition rural income = £1, what is the squared poverty gap index (P2) given that the poverty line = £1.25? Suppose that rural income now rises to £2, other things being equal, how would you characterise and show this type of growth?

The following table shows income distribution data for 2015 and 2020 from the World Bank in Colombia and Dominican Republic respectively. Quintile Colombia Lowest 20% Second 20% Third 20% Fourth 20% Highest 20% 2015 3.8 7.9 12.5 20 55.8 2020 2.8 7.4 11.9 19.6 58.3 Dominican Republic 2020 6.2 10.7 14.9 21.7 46.5 2015 5 9.3 13.8 20.9 51 a. Given the adoption of the Sustainable Development Goals (SDGs) by the UN in September 2015, what can you say about the effect on relative income inequality in these two countries? Can it be illustrated graphically? b. Consider a 12-person economy where the individuals are employed equally across the sectors. If the modern urban wage = £8, the informal urban wage = £3, and the tradition rural income = £1, what is the squared poverty gap index (P2) given that the poverty line = £1.25? Suppose that rural income now rises to £2, other things being equal, how would you characterise and show this type of growth?

Economics:

10th Edition

ISBN:9781285859460

Author:BOYES, William

Publisher:BOYES, William

Chapter33: Income, Income Distribution, And Poverty

Section: Chapter Questions

Problem 4E

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The following table shows income distribution data for 2015 and 2020 from the World Bank in Colombia and Dominican Republic respectively Quintile Colombia Colombia Dominican Republic Dominican Republic 2015 2020 2015 2020 Lowest 20% 3.8 2.8 5 6.2 Second 20% 7.9 7.4 9.3 10.7 Third 20% 12.5 11.9 13.8 14.9 Fourth 20% 20 19.6 20.9 21.7 Highest 20% 55.8 58.3 51 46.5 1. Consider a 12-person economy where the individuals are employed equally across thesectors. If the modern urban wage = £8, the informal urban wage = £3, and the traditionrural income = £1, what is the squared poverty gap index (P2) given that the poverty line= £1.25? Suppose that rural income now rises to £2, other things being equal, how wouldyou characterise and show this type of growth?
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