Chapter 30: Q.30.3 - Learning Objectives (page 668)
Distinguish among alternative approaches to measuring and addressing poverty.
Some approaches to measuring and addressing poverty are Total poverty gap, headcount index, the average poverty gap, average income shortfall
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Consider the following estimates from the early 2010s of shares of income for each group. Use graph paper or a hand-drawn diagram to draw rough Lorenz curves for each country. Which has the most nearly equal distribution, based on your diagram?
Why do you suppose that choosing other increments besides \(15,000 or \)30,000 can yield even more distributional variations of households within these seven income groupings?
(Hint: what do you think could happen if one were to broaden the income increments to \(100,000 or narrow them to \)5,000 while holding the number of income groups equal to seven?)
In which the poverty rate has risen in some years and fallen in others but since 1985 has tended to lie in a range between 10 percent and just over 15 percent. If the government's official poverty rate has been based on an absolute measure of poverty instead of a relative measure, would the data plot have tended generally to have sloped upward over time or to have sloped downward? Explain.
The area labelled A is one-fourth of the area denoted B. What is the value of the Gini coefficient?
Consider the graph nearby, which depicts Lorenz curves for countries X, Y, and Z.
a. Which country has the least income inequality?
b. Which country has the most income inequality?
c. Countries Y and Z are identical in all but one respect: population distribution. The share of the population made up of children below working age is much higher in country Z. Recently, however, birthrates have declined in country Z and risen in country Y. Assuming that the countries remain identical in all other respects, would you expect that in 20 years the Lorenz curves for the two countries will be closer together or farther apart? (Hint: According to the age-earnings cycle, what typically happens to income as an individual begins working and ages?)
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