LABOR ECONOMICS
8th Edition
ISBN: 9781260004724
Author: BORJAS
Publisher: RENT MCG
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Question
Chapter 7, Problem 14P
a)
To determine
The Gini coefficient for the given economy.
b)
To determine
The effect of imposing a 30% tax on the wealthiest 2,000 individuals.
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Which one of the following is the most likely to be associated with an increase in the incidence of poverty?
A) The Gini coefficient falls substantially.
B) The number of single persons with children and of single pensioners has increased substantially.
C) The real income of those in the top 20% of income earners falls by 10%.
D) The number of people earning below the level of income support has decreased.
The table below presents the system in the country of Boonton. The numbers indicate the percentage of income in that bracket that is taxed. For example, someone making $13,000 would be taxed 23% of that amount.
Income Earned Tax % applied to that Income
Under $15,000 23
$15,001 - $30,000 24
$30,001 - $45,000 25
$45,001 - $60,000 27
If a household in Boonton currently makes $20000, how much do they owe in taxes?
Which of the following statements regarding the Gini coefficient are correct?
A. It is the measure of the average difference in income between every pair of individuals in the population.
B. It can be calculated exactly as g=A/(A+B), where A is the area between the Lorenz curve and the 45-degree line, and A + B is the area under the 45-degree line.
C. The fraction A/(A+B) is an accurate approximation when the population is small.
D. If 50% of a large population owned 2% of the wealth each, then the Gini coefficient equals 0.6.
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Similar questions
- a. Is the presence of an underground economy likely to result in a Gini coefficient that overstates or understates poverty? b. Consider a simple economy where 90 percent of citizens report an annual income of $10,000 while the remaining 10 percent report an annual income of $110,000. What is the Gini coefficient associated with this economy? c. Suppose the poorest 90 percent of citizens actually have an income of $15,000 because each receives $5,000 of unreported income from the underground economy. What is the Gini coefficient now?arrow_forwardA group of 10 old college friends have the following annual incomes: Income $32, 000 $12, 000 $56, 000 $120, 000 $10, 000 $38, 000 $70, 000 $16, 000 $20, 000 $24, 000 What is the total income received by the top quintile of this income distribution? Provide your answer below:arrow_forward[1] Consider an income distribution S: (10, 20, 30, 50, 100). Suppose it is divided into two groups, group A: (10, 30, 50) and group B: (20, 100). Let the poverty line be 30. (a) Show that for both Headcount and Poverty Gap, the weighted sum of poverty for group A and group B is the same as the overall poverty in S. (b) Now consider a relative poverty line which is 60 percent of the median income for each group. Will the decomposition rule still hold? Explain.arrow_forward
- Dina and Charles are married, under the age of 65, and have two children under the age of 18. Charles works full time and earns $19,000, while Dina works part time and earns $9,000. Thus, in total, their family income is $28,000. Are Charles and Dina living in poverty? O Yes O No Suppose that Charles divorces Dina and leaves the family without paying alimony or child support. Dina must now support her two children alone, so she begins working full time and earns a total of $18,000. Are Dina and her children living in poverty? O Yes O No Again, consider Dina, a single mother with two children under 18 who earns an annual income of $18,000. Suppose that Dina qualifies for a welfare program for single mothers that provides her with $4,000 in food assistance. After receiving welfare, is Dina's family living in poverty? O Yes O Noarrow_forwardConsider an income distribution S: (10, 20, 30, 50, 100). Suppose it is divided into two groups, group A: (10, 30, 50) and group B: (20, 100). Let the poverty line be 30. (a) Show that for both Headcount and Poverty Gap, the weighted sum of poverty for group A and group B is the same as the overall poverty in S. (b) Now consider a relative poverty line which is 60 percent of the median income for each group. Will the decomposition rule still hold? Explain. Your answerarrow_forward
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