Suppose that, on average, men earn $17 an hour and have an average of 15years of schooling. Women earn $15 an hour and have an average of 14years of schooling. If the estimated return to schooling for men is 0.30(implying that each additional year of schooling translates into an additional30 cents per hour) and the returns for schooling for women is 0.2, then thegender gap in schooling explains:10% of the wage gap between men and women.20% of the wage gap between men and women.30% of the wage gap between men and women.15% of the wage gap between men and women.

Given: Average earning of man : $17 per hour Average earning of woman : $15 per hour Average years…

Answered: Suppose that, on average, men earn $17…

Exploring Economics

8th Edition

ISBN:9781544336329

Author:Robert L. Sexton

Publisher:Robert L. Sexton

Chapter17: Income, Poverty, And Health Care

Section: Chapter Questions

Problem 11P

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Here is one hypothesis: A well-funded social safety net can increase economic equality but will reduce economic output. Explain why this might be so, and sketch a production possibility curve that shows this tradeoff.
Discuss how the wage-schooling locus is determined in the labor market, and why it is upward sloping and concave.
“It will be difficult to solve South Africa’s extreme inequality problem without more direct wealth redistribution efforts, according to French economist Thomas Piketty. Piketty, who was the keynote speaker at a webinar celebrating 100 years of economics at the University of the Witwatersrand, was responding to debates around the creation of a basic income grant in South Africa.” Source: https://mg.co.za/business/2022-09-06-direct-wealth-distribution-needed-to-fix-sas-extreme-inequality-says-piketty/ Which of the following statement is correct? a. Thomas Piketty believes that a basic income grant is necessary to reduce income inequality b. if instituted, the basic income grant would increase income inequality c. if instituted, the basic income grant would have NO effect on income inequality d. Income inequality is caused by government wealth redistribution
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?
Now suppose that there is mobility in the labour market in country Alpha and we are in the pre-minimum wage period. Country Alpha receives migrants from country Beta and these migrants are positively selected. a) If we believe in the Roy model, do you expect country Alpha or country Beta to have a higher income inequality? b) Suppose country Alpha decides to adopt a welfare program to increase the minimum income of its workers. This minimum income is granted to all native workers, immigrant workers, and the new incoming immigrants. Using the Roy model, and ignoring how the program is funded, with the aid of a diagram, discuss how the welfare program changes the selection of the immigrant flow to country Alpha
Discuss how empirical studies estimate the rate of return to schooling and the methods used to avoid the problem of ability bias.
oaxaca decomposition Suppose that, on average, men earn $20 an hour and have an average of 15 years of schooling. Women earn $15 an hour and have an average of 14 years of schooling. If the estimated return to schooling for men is 0.30 (implying that each additional year of schooling translates into an additional 30 cents per hour), then the gender gap in schooling explains: 20% of the wage gap between men and women More than 100% of the wage gap between men and women 15% of the wage gap between men and women None of the wage gap between men and women 6% of the wage gap between men and women
Please answer based on information above. Would this transfer increase, decrease, or have no effect on income inequality in this group? Redistributing income from the highest earner to the lowest one would reduce the utility of the top earner and increase the utility of the lowest earner. But what would happen to overall utility in the economy? Would it increase, decrease, or remain the same? Explain your answer. (Hint: does the marginal utility of income diminish as one earns more?)
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. Your answer
Now suppose that there is mobility in the labour market in country Alpha and we are in the pre-minimum wage period. Country Alpha receives migrants from country Beta and these migrants are positively selected. If we believe in the Roy model, do you expect country Alpha or country Beta to have a higher income inequality?
The dynamic nature of poverty can be observed through... [Select multiple answers] a transition matrix that tells us what proportion of poor and non-poor have transitioned in and out of poverty. poverty dynamics in multiple periods as a film and then ascertaining whether people are transitory, chronic, or persistent poor. a recursion function that describes how present poverty can be determined from past poverty poverty gap ratio (PGR) that tells us the total amount of resources needed to eliminate poverty relative to the available resources.
Consider a society consisting of two people. Edison earns an income of $85,000 per year and Hilary earns an income of $25,000 per year. The government is considering a redistribution plan that would impose a 25% tax on Edison's income and give the revenue to Hilary. Without any incentive distortion, Edison would retain $63,750 and Hilary would end up with $46,250. However, let us assume that since Edison will not receive all the income he earns, he decides to work less and earn an income of only $75,000, of which 25%×$75,000=$18,75025%×$75,000=$18,750 will be owed in taxes. With the redistribution plan, Edison will take home an income of_________. . The $18,750 that Edison pays in taxes will be transferred by the government to Hilary. Let us assume that since Hilary now receives payment from the government, she will not work as many hours and will earn an income from work of only $24,000 instead of her initial $25,000. With the redistribution plan, Hilary's total…

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