Consider the Following Distribution of Income in a 12-Person Economy

question 24

Essay

Consider the following distribution of income in a 12-person economy, with the modern urban?wage ₌ 3, the traditional rural income ₌ 1, and the informal urban wage ₌ 2: (1, 1, 1, 1, 2, 2, 2, 2, 3, 3, 3, 3). The poverty line ₌ 1.25. Suppose rural incomes are raised to 1.5 through expanded agricultural exports. What happens to relative inequality? Absolute poverty? Calculate the Ahluwalia-Chenery Welfare Index for terciles (3 fractiles) under GNP weights and equal weights. Why is the equal-weighted index higher?

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Definitions:

Mediation

A conflict resolution process where a neutral third party assists disputing parties to reach a mutually acceptable agreement.

Statutory Governance

The system of rules and principles that govern entities, established through legislation or statutory law.

Pay Secrecy

A policy or practice where employees are discouraged or prohibited from discussing their salaries with coworkers.

Discrimination Claim

A formal accusation of unfair treatment based on various protected characteristics such as race, gender, or age.