Answer to Question #215409 in Economics for Meher

Question

Define regressive transfer as a transfer of money (income) from a poor person to a less poor person. Suppose there is a regressive transfer of $0.50 from person 1 to person 4, i.e., we take $0.50 from person 1 and give it to person 4.

1.    After the regressive transfer (as defined above), what is the new value of ? [1 point]

2.    Did your value of  change after the regressive transfer? Why or why not? [3 points]

3.    Can you propose a different poverty measure that will be able to reflect the regressive transfer? Discuss. [3 points]

Answer 1

1.

$$\frac {0.5}{4}=0.125$$

2.

Since the transfer was made to a less poor person, the value of money decreased. For the less poor, the value of money is inversely proportional to its quantity.

3.

Another measure of poverty is human capabilities. In recent decades, the limitations of assessing absolute and relative income poverty have become increasingly obvious. First of all, the amount of income depends to a large extent on the principles of their determination and the completeness of accounting. In addition, the amount of income does not generally reflect a number of aspects of human well-being. The very size of disposable income does not carry any information about how fulfilling a person's life is. After all, poor people are not just those who have low incomes, but primarily those who are deprived of the fundamental freedom of action and choice, which those living in society take for a natural given.

In this regard, along with the concepts of poverty discussed above, the concept of deprivation has become widespread in world practice, i.e. assessing poverty through relative deprivation.