Assume 20% of the population has an average income of 10 cents (because 20% of the...

 

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Assume 20% of the population has an average income of 10 cents (because 20% of the population has a daily income below 20 cents). Assume 15% of the population has an average income of 30 cents (because 15% has a daily income between 20 and 40 cents), etc. (follow same reasoning for all the other groups; for each group take the mid-point as average income). Then calculate Yq: (0.20.1) + (0.15 * 0.3) + ... 0.8 Where the denominator = 0.8 because 80% of population is below the poverty line (we do not know exact number, only %) Numerator: first term is (0.2 * 0.1) because 20% of population (0.2) has average income 10 cents (0.1) 4. What is the Lorenz curve and how do you construct it? Draw a relatively equal and a relatively unequal Lorenz curve. Explain the difference. 5. How do you calculate a Gini coefficient? How does the Gini coefficient reflect high or low income inequality and why? 6. Draw the Lorenz curve and calculate the Gini coefficient for two countries based on the following decile income share data, where the poorest decile is on the right and the richest is on the left. What can you infer from the comparison of the Gini coefficients between these two countries? Country A 30 20 15 Country B 20 15 10 10 10 10 5 5 10 5 5 32 10 10 4 1 Assume 20% of the population has an average income of 10 cents (because 20% of the population has a daily income below 20 cents). Assume 15% of the population has an average income of 30 cents (because 15% has a daily income between 20 and 40 cents), etc. (follow same reasoning for all the other groups; for each group take the mid-point as average income). Then calculate Yq: (0.20.1) + (0.15 * 0.3) + ... 0.8 Where the denominator = 0.8 because 80% of population is below the poverty line (we do not know exact number, only %) Numerator: first term is (0.2 * 0.1) because 20% of population (0.2) has average income 10 cents (0.1) 4. What is the Lorenz curve and how do you construct it? Draw a relatively equal and a relatively unequal Lorenz curve. Explain the difference. 5. How do you calculate a Gini coefficient? How does the Gini coefficient reflect high or low income inequality and why? 6. Draw the Lorenz curve and calculate the Gini coefficient for two countries based on the following decile income share data, where the poorest decile is on the right and the richest is on the left. What can you infer from the comparison of the Gini coefficients between these two countries? Country A 30 20 15 Country B 20 15 10 10 10 10 5 5 10 5 5 32 10 10 4 1

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