Income distribution. The government of a small country is planning sweeping changes in the tax structure in order to provide a more equitable distribution of income. The Lorenz curves for the current income distribution and for the projected income distribution after enactment of the tax changes are as follows: f ( x ) = x 2.3 Current Lorenz curve g ( x ) = 0.4 x + 0.6 x 2 Projected Lorenz curve after changes in tax laws Find the Gini index of income concentration for each Lorenz curve. Will the proposed changes provide a more equitable income distribution? Explain.
Income distribution. The government of a small country is planning sweeping changes in the tax structure in order to provide a more equitable distribution of income. The Lorenz curves for the current income distribution and for the projected income distribution after enactment of the tax changes are as follows: f ( x ) = x 2.3 Current Lorenz curve g ( x ) = 0.4 x + 0.6 x 2 Projected Lorenz curve after changes in tax laws Find the Gini index of income concentration for each Lorenz curve. Will the proposed changes provide a more equitable income distribution? Explain.
Solution Summary: The author calculates the Gini index of income concentration for the Lorenz curve.
Income distribution. The government of a small country is planning sweeping changes in the tax structure in order to provide a more equitable distribution of income. The Lorenz curves for the current income distribution and for the projected income distribution after enactment of the tax changes are as follows:
f
(
x
)
=
x
2.3
Current Lorenz curve
g
(
x
)
=
0.4
x
+
0.6
x
2
Projected Lorenz curve after changes in tax laws
Find the Gini index of income concentration for each Lorenz curve. Will the proposed changes provide a more equitable income distribution? Explain.
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