Suppose there are 5 workers in an economy and initially all the workers work in the traditional sector at a wage equal to 1 (call this initial…
2. Suppose there are 5 workers in an economy and initially all the workers work in the traditional sector at a wage equal to 1 (call this initial period, period 0). In each subsequent period, one worker migrates from the traditional sector to the modern sector where wages are equal to 4. Assuming that the number of workers remains constant, then period 5 all the workers are in the modern sector.
a) What is the Gini coefficient of inequality in period 0 and period 5?
b) As migration takes place explain what happens to the Gini coefficient of inequality?
c) As migration takes place explain what happens to the per capita income of the workers?
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