   Chapter 28, Problem 2QP

Chapter
Section
Textbook Problem

“The Gini coefficient for country A is 0.35, and for country B it is 0.22. Therefore, the bottom 10 percent of income recipients in country B have a greater percentage of the total income than the bottom 10 percent of the income recipients in country A.” Do you agree or disagree? Why?

To determine

Comparing values of Gini coefficient between two countries and its income distribution.

Explanation

Gini coefficient is used to measure the income inequality derived from Lorenz curve. It is equal to the area between the line of perfect income equality and Lorenz curve. The value of Gini coefficient lies between zero and one. If its value is equal to zero, there will be no area in between perfect income equality and Lorenz curve, which means perfect income equality. On the other hand, if the value of Gini coefficient is equal to one, the area between perfect income equality and Lorenz curve will be large, which means complete income inequality. Generally, Gini coefficient is used for comparing income distribution in different countries...

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