LABOR ECONOMICS
8th Edition
ISBN: 9781260004724
Author: BORJAS
Publisher: RENT MCG
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Question
Chapter 7, Problem 4P
a)
To determine
The relation between Gini coefficient and the state of poverty.
b)
To determine
The Gini coefficient associated with the given economy.
c)
To determine
The Gini coefficient when the poorest receives an income of $15,000.
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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?
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.
Give a numerical example of how the headcount index doesn’t account for changes in the distribution below the poverty line. Assuming that the poverty line is 2, calculate the values of the index for each of the following distributions:
a) (1, 2, 3)
b) (1.5, 1.5, 3)
c) (1, 2, 2, 3)
d) (0.75, 2.5, 2.75)
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