the Human Poverty Index (HCR), Poverty Gap Ratio (PGR), and Income Gap Ratio (IGR)

Research and Formulation

Thesis Statement

In the given scenario, by analyzing the Human Poverty Index (HCR), Poverty Gap Ratio (PGR), and Income Gap Ratio (IGR) under each of the three policies, it can be determined that Policy II results in the lowest HCR, Policy III leads to the lowest PGR, and Policy II offers the lowest IGR.

Introduction

In this analysis, we will delve into the impact of different budget allocation policies on poverty indices within a region with three income groups. By considering the allocation of a $60 budget to groups below the poverty line, we aim to understand which policy is most effective in reducing poverty levels based on various indicators.

Policy I: Allocate the entire $60 to group A

– Group A: $60

– Group B: $0

– Group C: $0

HCR Calculation

– Number of poor with income below $15 in Group A: 10

– Total population: 20

– HCR = 10 / 20 = 0.5

PGR Calculation

– Total income gap for poor in Group A: 10 * (15 – 4) = $110

– PGR = 110 / (15 * 10) = 0.733

IGR Calculation

– Average income gap for poor in Group A: 11

– IGR = 110 / (15 * 10) = 0.733

Policy II: Allocate $36 to group A, $24 to group B

– Group A: $36

– Group B: $24

– Group C: $0

HCR Calculation

– Number of poor with income below $15 in Groups A and B: 10 + 4 = 14

– HCR = 14 / 20 = 0.7

PGR Calculation

– Total income gap for poor in Groups A and B: (10 * (15 – 4)) + (4 * (15 – 12)) = $118

– PGR = 118 / (15 * 14) = 0.561

IGR Calculation

– Average income gap for poor in Groups A and B: 8.43

– IGR = 118 / (15 * 14) = 0.561

Policy III: Allocate $24 to group A, $36 to group B

– Group A: $24

– Group B: $36

– Group C: $0

HCR Calculation

– Number of poor with income below $15 in Groups A and B: 10 + 6 = 16

– HCR = 16 / 20 = 0.8

PGR Calculation

– Total income gap for poor in Groups A and B: (10 * (15 – 4)) + (6 * (15 – 12)) = $114

– PGR = 114 / (15 * 16) = 0.475

IGR Calculation

– Average income gap for poor in Groups A and B: 7.125

– IGR = 114 / (15 * 16) = 0.475

Conclusion

Based on the calculations of HCR, PGR, and IGR under each policy, it can be concluded that Policy II results in the lowest HCR, Policy III leads to the lowest PGR, and Policy II offers the lowest IGR. Therefore, for a more effective reduction in poverty levels, Policy II could be considered as the most suitable option among the three policies provided.