Question

Question 2 Consider countries A and B, each with a population of cight individuals and an income per capita equal to S5 USD dollars (PPP) per day. Tables 1 and 2 provide the information on income for each individual in country A and B, respectively. The poverty line is z-S5 USD Dollars (PPP) per day. Your job is to calculate and report the different FGT poverty indexes for each country remembering that: To do so, complete the following steps. a). First, complete Tables 1 and 2. (Use two decimal spaces in your calculations) Table 1 Table 2 ntry Person # y Poor Poor" ( Poor" so y oor oor (I if household(zy)(z-y) (1 if household(z-y)(z-y* is poor, 0 (only if(only if otherwise)* is poor, 0(only if(only if otherwise)* Total40 0 b). Second, compute the different FGT measures for each country and report them in the table below. (Report the measures as percentages and round to the nearest integer). Final answers Country A Country B FGT

Answer 1

Given: Poverty line is $5 per day (z = 5). So, if the income (y) is less than $5 (y<5), then we conclude that the individual is poor.

(a) Following are the tables including the calculations for the 2 countries.

Country A

Person y    Poor (1 if household is poor, 0 otherwise) (z-y) (Only if poor) (z-y)2 (Only if poor) 1 $1 1 4 16 2 $3 1 2 4 3 $4 1 1 1 4 $4 1 1 1 5 $5 0 -- -- 6 $7 0 -- -- 7 $8 0 -- -- 8 $8 0 -- -- Total $40 4 8 22

Country B

Person y    Poor (1 if household is poor, 0 otherwise) (z-y) (Only if poor) (z-y)2 (Only if poor) 1 $3 1 2 4 2 $3 1 2 4 3 $3 1 2 4 4 $4 1 1 1 5 $6 0 -- -- 6 $6 0 -- -- 7 $6 0 -- -- 8 $9 0 -- -- Total $40 4 7 13

(b) Following is the FGT measure summary for the two countries.

We calculate FGT using the following formula:

$FGT_{\alpha} = \frac{1}{Nz^{\alpha}}\Sigma _{i=1}^{q}(z - y_{i})^{a}$, $\alpha = 0,1,2$
Plugging in the following values, we get the FGT scores.

$\alpha = 0, N=8, (z-y_{i}) values$

FGT measure summary for the 2 countries (as percentage values)

Final Answers	Country A	Country B
FGT0	50	50
FGT1	20	17.5
FGT2	11	6.5

Calculations of the FGT measures are as below.