4. High income inequality in Singapore In 2012, Singapore had the highest income inequality among all developed economies in the Organization for Economic Cooperation and Development

(OECD). The degree of inequality in the distribution of both market income and money income in Singapore is much higher than in South Korea. The government of Singapore argues that the high degree of income inequality results from its low taxes, which do not allow high social welfare spending.

Source: The Heart Truths, February 21, 2013

a. Is the Singapore government’s argument to explain the higher inequality in the distribution of both market income and money income, as compared to South Korea, valid? Explain your answer.

b. Instead of making direct payments to the low-income households, what kinds of transfers in kind can the government of Singapore provide in order to improve the equality of income distribution?