Using the Public Finance, I Textbook. Answer, Chapter 5: Q.1, Q.4

1. The table below shows the income shares by quintile for Canada in 2020 for different income measures. [LO1 ] Income Market Income (before taxes and Total Income (before taxes and after After-Tax Income (after Quintile transfers) transfers) transfers) Lowest quintile 3.6 6.9 7.8 Second quintile 9.7 12.7 14.6 Third quintile 16.4 17.9 19.0 Fourth quintile 25.3 24.0 23.8 Highest 44.9 38.5 34.8 quintile Source: Statistics Canada, data table 36-10-0587-01. Percentages may not add up to 100 percent due to rounding a. Calculate the cumulative income shares for all three income measures. Page 119 b. Draw the Lorenz curve for each income concept using an Excel spreadsheet or by sketching a graph. According to the data, what contributes more to reducing income inequality in Canada-transfers or taxes? Discuss. c. Suppose instead of calculating income shares and drawing the Lorenz curves, as above, you use the Gini coefficient to determine the effect of government taxes and transfers on income inequality (for 2019, the Gini coefficient was 0.421 based on market income and 0.299 based on income after taxes and transfers). Briefly discuss the advantages (or disadvantages) of using this approach rather than the Lorenz curve approach to measuring the effect of government policies on income inequality.income. What other measures of well-being does Canada track and how have these changed over time? [LO4] 4. Are the concepts of fairness and equality in the distribution of income synonymous? To what extent is income inequality consistent with fairness? What are the implications of your answer for government expenditure policy? [LO5]