Chapter 30: Q.30.2 - Learning Objectives (page 668)
Identify the key determinants of income differences across individuals and discuss theories of the desired income distribution.
The key determinants are - Economic development and growth, per capita GDP, international trade,
natural resources.
Over 30 million students worldwide already upgrade their learning with Vaia!
All the tools & learning materials you need for study success - in one app.
Get started for free
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?
During the past decade, many members of the baby boom generation have passed through ages ranging from the middle 40s to the late 50s. Do you suppose that the fact that there have been more members of this generation than other generations in the population during this past decade tends to imply that there was higher or lower measured inequality over the period? Why?
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?)
Now suppose that in the situation described in Problem 30-13, the distribution of income changes in such a way that A increases to one-third of the area denoted B. What is the new value of the Gini coefficient?
Who provides the more than $100 billion that Medicare spends on prescription drugs each year?
What do you think about this solution?
We value your feedback to improve our textbook solutions.
