Poverty, Inequality, and Development

What does the Lorenz Curve illustrate?

• Economic growth over time

• Distribution of income or wealth

• Poverty incidence in rural areas

• Relationship between GDP and HDI

A Gini coefficient of 0 represents:

• Absolute inequality

• Moderate inequality

• Perfect equality

• High inequality

Which is NOT a desirable property of an inequality measure?

• Anonymity

• Distributional sensitivity

• Transfer principle

• Market neutrality

The Headcount Index measures:

• Depth of poverty

• % of people below poverty line

• Income inequality

• Wage share of capital

What does the MPI include?

• Only income

• Education, health, living standards

• Taxes and transfers

• GDP growth and inflation

According to Kuznets, inequality initially _____ with development, and then _____.

• decreases; rises

• increases; decreases

• increases; stabilizes

• stays constant; declines

FGT Index with α=2 captures:

• Headcount Index

• Depth of poverty

• Inequality among the poor

• Rural employment rate

Poverty gap index gives more weight to:

• Those closest to poverty line

• Richest quintile

• Middle class

• Poorest of the poor

Workfare is better than welfare when:

• The poor have high education

• Poverty is only urban

• Screening the poor is hard

• Universal programs are cheaper

What does MPI suggest for policymakers?

• Just increase GDP

• Focus on income only

• Address multiple deprivations

• Reduce indirect taxes