In the first problem solving scenario, consider a Greek island with ten inhabitants. Answer the questions below. a) Plot the Lorenz curve for the income distribution: (5, 8, 15, 18, 23, 35, 48, 52, 66, 80) b) The government plans to implement a 10% flat tax on income for each inhabitant of the island. Plot the new Lorenz curve and verify if this policy has reduced the inequality among the population. Argue c) Imagine that after one year the government decides to implement instead a lump-sum tax equal to 10 for all inhabitants with an income above 30. Plot the new Lorenz curve and verify if this policy has reduced the inequality among the population. Argue d) Calculate the Giní index and the Sen index for the three income distributions used in parts (a), (b) and (c) when the poverty line is z=14. Discuss the values obtained. e) Is it possible for a government to pursue a poverty reduction target, but at the same time ending up increasing inequality? Justify your answer.
In the first problem solving scenario, consider a Greek island with ten inhabitants. Answer the questions below. a) Plot the Lorenz curve for the income distribution: (5, 8, 15, 18, 23, 35, 48, 52, 66, 80) b) The government plans to implement a 10% flat tax on income for each inhabitant of the island. Plot the new Lorenz curve and verify if this policy has reduced the inequality among the population. Argue c) Imagine that after one year the government decides to implement instead a lump-sum tax equal to 10 for all inhabitants with an income above 30. Plot the new Lorenz curve and verify if this policy has reduced the inequality among the population. Argue d) Calculate the Giní index and the Sen index for the three income distributions used in parts (a), (b) and (c) when the poverty line is z=14. Discuss the values obtained. e) Is it possible for a government to pursue a poverty reduction target, but at the same time ending up increasing inequality? Justify your answer.
Micro Economics For Today
10th Edition
ISBN:9781337613064
Author:Tucker, Irvin B.
Publisher:Tucker, Irvin B.
Chapter12: Income Distribution, Poverty, And Discrimination
Section: Chapter Questions
Problem 17SQ
Related questions
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Transcribed Image Text:In the first problem solving scenario, consider a Greek island with ten inhabitants. Answer the questions below.
a) Plot the Lorenz curve for the income distribution:
(5, 8, 15, 18, 23, 35, 48, 52, 66, 80)
b) The government plans to implement a 10% flat tax on income for each inhabitant of the island. Plot the new Lorenz curve and verify if this policy
has reduced the inequality among the population. Argue
c) Imagine that after one year the government decides to implement instead a lump-sum tax equal to 10 for all inhabitants with an income above
30. Plot the new Lorenz curve and verify if this policy has reduced the inequality among the population. Argue
d) Calculate the Giní index and the Sen index for the three income distributions used in parts (a), (b) and (c) when the poverty line is z=14. Discuss
the values obtained.
e) Is it possible for a government to pursue a poverty reduction target, but at the same time ending up increasing inequality? Justify your answer.
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