ECO2003F - Intermediate Microeconomics Inequality Assignment

Assignment Task

Question

1. Does high income inequality across individuals (cross-sectional inequality) in a country necessarily lead to high intergenerational inequality? Discuss. Ensure that you properly explain the terms that you use.

2.Use the model on economic inequality over time to discuss how the 1913 Land  Act may have contributed to current levels of inequality in South Africa. Draw reference from the article by Francis Wilson (2011) Historical Roots of Inequality in South Africa, Economic History of Developing Regions . (access via UCT library or through Link in Week 3/4 lesson page on vula).

3 a. Draw a Lorenz curve disposable income for an economy comprising of unemployed, workers and employers that serves as a representation of South Africa. Assume that all unemployed receive some form of grant from the government

b. Use this orenz curve to explain how the COVID pandemic that raised unemployment affects income inequality.

c. To deal with unemployment, the government introduced a COVID income grant (a monthly payment to individuals) targeting poor households and individuals that have no jobs. Assume that the grant is financed through taxation of workers and employers. Use the Lorenz curve from (a) to illustrate and discuss the impact on inequality of disposable income.

d. The COVID pandemic has led to rapid adoption of technology that benefits the relatively skilled. Present new Lorenz curves to illustrate how the adoption of this technology may affect market income inequality. Assume the economy comprises unemployed, workers and employers. In this analysis, assume that the unemployed receive no wage or other market income 

4. The table below shows two alternative distributions of land ownership in different villages. Calculate the Gini coefficient in each case.

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