Microeconomics · free preview
Inequality and Redistribution
The Lorenz curve and the Gini coefficient measure how unequally income is spread, and antipoverty policy is a design problem of transfers that help without trapping, where phase-outs beat cliffs and universal schemes beat means tests on incentives.
1. Drawing the distribution
Drawing the distribution
2. The instruments
The instruments
3. The cliff problem
The cliff problem
4. Judging the slice
Judging the slice
5. Reading the Lorenz curve
In the village Lorenz curve, the poorest half of households holds 25 percent of income. What does that tell you?
6. Computing a Gini
The area under a Lorenz curve is 32.7 percent of the square between 0 and 100 percent. What is the Gini coefficient?
7. The cliff arithmetic
A family's 600 dollar monthly benefit stops entirely at 1,000 dollars of monthly earnings. A raise takes them from 980 to 1,020. What is the implicit marginal tax on the 40 dollar raise?
8. Why phase-outs dominate cliffs
The same 600 dollar benefit is instead withdrawn at 20 cents per earned dollar. Why is this design better than the cliff?
9. The bottom half's share
The village's five poorest households earn 5, 10, 15, 20 and 25 thousand of the 300 thousand total. Compute the poorest half's income share in percent, and write the number.
10. The phase-out break-even
A 600 dollar monthly benefit is withdrawn at 20 cents per earned dollar with no base disregard. Compute the monthly earnings in dollars where the benefit reaches zero, and write the number.
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