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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Inequality decreases. Poverty ...View Answer
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