Chapter 5

Question 1

most commonly used by economists; deals with individual persons or households and the total income they receive

Answer 1

Size Distributions

Question 2

20% proportion, five groups

Answer 2

Quintile

Question 3

10% proportion, ten groups

Answer 3

Decile

Question 3

disproportionate distribution of total national income among households

Answer 3

Income Inequality

Question 4

a graph depicting the variance of the size distribution of income from perfect equality

Answer 4

Lorenz Curve

Question 4

an aggregate measure of income inequality ranging from 0 to 1 (from perfect equality to perfect inequality); measured graphically by dividing the area between the perfect equality line and the Lorenz curve by the total area; satisfy the four desirable properties

Answer 4

Gini coefficient

Question 5

Four Desirable Properties for Inequality Measures

Answer 5

Anonymity
Scale Independence
Population Independence
Transfer Principle

Question 6

measure should not depend on who has higher income

Answer 6

Anonymity

Question 7

proportion of a country’s population living below the poverty line
H – number of poor
N – total number of people

Answer 7

Headcount Index

Question 7

all other incomes constant, if transfer of income from a richer to a person, resulting new income distribution is more equal

Answer 7

Transfer Principle

Question 7

measure should not depend on the size of the economy, but the income dispersion

Answer 7

Scale Independence

Question 8

measure should not be based on the number of income recipients

Answer 8

Population Independence

Question 9

the situation of being barely able to meet the subsistence essentials of food, clothing, and shelter

Answer 9

Absolute Poverty

Question 10

the sum of the difference between the poverty line and actual income levels of all people living below that line
Yp – absolute poverty line
Yi – the income of the ith poor person

Answer 10

Total Poverty Gap

Question 11

TGP/N

Answer 11

Average Poverty Gap (APG)

Question 12

APG/ Yp

Answer 12

Normalized Poverty Gap (NGP)

Question 13

TPG/H

Answer 13

Average Income Shortfall (AIS)

Question 14

a good poverty measure will be based only on the incomes (well-being) of the poor; an increase or decrease in the income of those above the poverty line should not affect how we measure poverty

Answer 14

Focus Principle

Question 14

AIS/ Yp

Answer 14

Normalized Income Shortfall (NIS)

Question 15

used in empirical work on income poverty because of its sensitivity to the depts and severity of poverty

Answer 15

P2

Question 15

all of the benefits of growth are divided among traditional-sector workers, with little or no growth occurring in the modern sector; more equal relative distribution of income, curve move upwards

Answer 15

Traditional-sector Enrichment

Question 16

the P class of poverty measure , which include as special cases the headcount ratio and the normalized income shortfall, but in other cases, notably the P2 measure, satisfy all four axioms for desirable poverty measures, including distributional sensitivity

Answer 16

Foster-Greer-Thorbecke (FGT) Index

Question 17

growth is limited to a fixed number of people in the modern sector, with both the numbers of workers and their wages held constant in the traditional sector; less equal relative distribution of income, curve move downwards

Answer 17

Modern-sector Enrichment

Question 18

two-sector economy develops by enlarging the size of its modern sector while maintaining constant wages in both sectors; may improve or worsen, curve crosses

Answer 18

Modern-sector Enlargement

Question 19

the inverted-U is consistent with modern sector enlargement growth; the distribution of income will tend to worsen at early stages

Answer 19

Kuznets' Inverted-U Hypothesis

Question 20

the distributive implications of economic growth as reflected in such factors as participation in the growth process and asset ownership

Answer 20

Character of Economic Growth

Question 21

identifies the poor using dual cutoff; focused on deprivations in health, education, and standard of living (each has equal weight)

Answer 21

Multidimensional Poverty Index (MPI)

Question 22

An arbitrary international real income measure, usually expressed in constant dollars (e.g., $1 per day), used as a basis for estimating the proportion of the world’s population that exists at bare levels of subsistence.

Answer 22

International Poverty Line

Question 23

The ownership of land, physical capital (factories, buildings, machinery, etc.), human capital, and financial resources that generate income for owners. The distribution of asset ownership is a major determinant of the distribution of personal income in any non-socialist society.

Answer 23

Asset Ownership

Question 24

The income that is available to households for spending and saving after personal income taxes have been deducted.

Answer 24

Disposable Income

Question 25

first, cutoff levels within each dimension, second, cutoff in the number of dimensions in which a person must be deprived to be deemed multidimensionally poor

Answer 25

Dual cutoff

Question 26

Three MPI Indicators

Answer 26

Health Education Standard of Living

Question 27

are treated as substitutes up to a point but then as complements

Answer 27

Capabilities

Question 28

if a person already identified as poor becomes deprived in another indicator, she is measured as even poorer

Answer 28

Dimensional Monotonicity

Question 29

The distribution of income to factors of production without regard to the ownership of the factors.

Answer 29

Functional Distribution of Income

Question 30

Taxes levied on goods purchased by the consumer (and exported by the producer) for which the taxpayer’s liability varies in proportion to the quantity of goods purchased or sold. Examples of indirect taxes are customs duties (tariffs), excise duties, sales taxes, and export duties. They are a major source of tax revenue for most LDCs as they are easier to administer and collect than direct taxes (e.g., income and property taxes).

Answer 30

Indirect Taxes

Question 30

Resources or inputs required to produce a good or a service. These are land, labor, and capital.

Answer 30

Factors of Production

Question 31

A relationship between a country’s income per capita and its equality of income distribution such that as per capita incomes increase, the distribution of income at first worsens and later improves from very low levels.

Answer 31

Kuznets Curve

Question 32

A deliberate attempt to reorganize and transform existing agrarian systems with the intention of improving the distribution of agricultural incomes and thus fostering rural development

Answer 32

Land Reform

Question 33

The distribution of income according to size class of persons - for example, the share of total income accruing to, say, the poorest 40% of a population or the richest 10%, without regard to the sources of that income (whether it comes from wages, interest, rent, or profits).

Answer 33

Personal Distribution of Income

Question 34

A tax whose rate increases with increasing personal incomes, such that the proportion of personal income paid in taxes by a rich person is higher than that paid by a poorer person. A progressive tax structure therefore tends to improve income distribution

Answer 34

Progressive Income Tax

Question 35

A tax structure in which the ratio of taxes to income tends to decrease as income increases. Relatively poor people will pay a larger proportion of their income in taxes than relatively rich people. A regressive tax therefore tends to worsen income distribution.

Answer 35

Regressive Tax

Question 36

All current expenditures for purchases of goods and services by all levels of government; includes capital expenditures on national defense and security.

Answer 36

Public Consumption

Question 37

Policies geared to reducing income inequality and expanding economic opportunities in order to promote development.

Answer 37

Redistribution Policies

Question 38

A payment by the government to producers or distributors in an industry to prevent the decline of that industry (e.g., as a result of continuous unprofitable operations) or an increase in the prices of its products or simply to encourage it to hire more labor

Answer 38

Subsidy

Question 39

A poverty program that requires program beneficiaries to work in exchange for benefits, such as a Food for Work Program.

Answer 39

Workfare -