Question
Consider an economy with 4000 people and the following income distribution: each person in the bottom quartile of the income distribution earns $10 dollars per
Consider an economy with 4000 people and the following income distribution: each person in the bottom quartile of the income distribution earns $10 dollars per hour; each person in the 2nd quartiles earns $20 dollars per hour; each person in the 3rd quartiles earns $25 dollars per hour;and each person in the top quartile of the income distribution earns $45 dollars per hour. (2) Suppose the bottom quartile pays no taxes, the 2nd quartiles pay 10% its income in taxes, the 3rd pays 20% and the top quartile pays 40% of its income in taxes. 80% of all tax money is redistributed equally to all citizens in the form of military defense, government pensions (social security), roads/highways, etc. The remaining tax money is distributed entirely to the poorest quartile. What is the Gini coefficient associated with this redistribution plan?
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