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Chapter 30: Q.1 (page 689)

Consider the graph nearby, which depicts Lorenz curves for countries X, Y, and Z.

a. Which country has the least income inequality?

b. Which country has the most income inequality?

c. Countries Y and Z are identical in all but one respect: population distribution. The share of the population made up of children below working age is much higher in country Z. Recently, however, birthrates have declined in country Z and risen in country Y. Assuming that the countries remain identical in all other respects, would you expect that in 20 years the Lorenz curves for the two countries will be closer together or farther apart? (Hint: According to the age-earnings cycle, what typically happens to income as an individual begins working and ages?)

Short Answer

Expert verified

a. The least income inequality is in country X

b. the most income inequality is in country Z

c. the Lorenz curves for the two countries will be farther apart

Step by step solution

01

Given Information

The Lorenz curve is the real strategy for concentrating on scattering. Showing the degree of takeoff scattering between equivalent dissemination and genuine circulation of a variable is utilized.

02

Explanation

Country Z has the greatest income inequality and Country X has the least. It is farthest from the ideal equity bend.

The two Lorenz curve will simply trade their situation. The bend for Y will become country Z and the bend for country Z will become for country Y. Any remaining standards, stay the same, following 20years, Country Z will have a lesser rate of birth, so more individuals will be in the income procuring age. Be that as it may, for country Y, as the rate of birth is expanding, more individuals will be underneath the income procuring age.

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Most popular questions from this chapter

Estimates indicate that in recent years, the poorest 40 percent of the population earned about 15 percent of total income in Argentina. In Brazil, the poorest 40 percent earned about 10 percent of total income. The next-highest 30 percent of income earners in Argentina received roughly 25 percent of total income. In Brazil, the next-highest 30 percent of income earners received approximately 20 percent of total income. Can you determine, without drawing a diagram (though you can if you wish), which country's Lorenz curve was bowed out farther to the right?

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