Like this presentation? Why not share!

# Income inequality

## on Jan 10, 2012

• 2,111 views

### Views

Total Views
2,111
Views on SlideShare
2,111
Embed Views
0

Likes
1
63
0

No embeds

### Report content

• Comment goes here.
Are you sure you want to

## Income inequalityPresentation Transcript

• Income inequality Dr.Naheed Sultana
• • The unequal distribution of household or individual income across the various participants in an economy. Income inequality is often presented as the percentage of income to a percentage of population. For example, a statistic may indicate that 70% of a countrys income is controlled by 20% of that countrys residents
• Lorenz curve• economics, the Lorenz curve is a graphical representation of the cumulative distribution function of the empirical probability distribution of wealth. It is often used to represent income distribution, where it shows for the bottom x% of households, what percentage y% of the total income they have
• Lorenz curve
• • Percent Distribution of Aggregate Household Income in 1978, by Fifths of Households• Households Percent of Income• Lowest Fifth (under \$6391) 4.3• Second Fifth (\$6392 - \$11955) 10.3• Third Fifth (\$11956 - \$18122) 16.9• Fourth Fifth (\$18122 - \$26334) 24.7• Top Fifth (\$26335 and over) 43.9
• How to build Lorenz Curves• Individual Income• 1 2,417• 2 7,800• 3 8,489• 4 10,072• 5 12,957
• • In this income distribution, individual 1 owns US\$2,417/year (he/she is the poorest),• while individual 5 owns US\$12,957/year (he/she is the richest). below, we• illustrate the process to build the Lorenz Curve
• Example 2
• Gini coefficient• In Figure 1, as OP is the equi distribution line, ORP is the area defined by the Lorenz Curve of the standard income distribution and the equi distribution line, called the concentration area. OPQ is the area of maximum concentration, i.e the area between the Lorenz Curve of income distribution C and theequidistribution ine.
• • G = concentration area/ maximum concentration areG = ORP/OPQ
• Coefficient of Variation (CV)• A measure of dispersion common in statistics, the CV, is simply the sample SD divided by the sample mean
• Functional distribution• The functional or factor share distribution of income, attempts to explain the share of total national income that each of factor of production receives .The theory of functional income distribution represents the percentage that labor receives as a whole and compares with the percentages of total income distributed in the form of rent, interest and profit .
• Functional income distribution
• R SLW PROFITSag Ee WeRat WAGESe Di=MPL 0 Le EMPLOYMENT
• Measuring Absolute Poverty• A population or sections of population living below a specific minimum level of real income measures the magnitude of absolute poverty.• Absolute poverty is measured using• Headcount(H)• Headcount Index (H/N)• Poverty Gap (total income shortfall)
• The headcount index• The headcount index is the proportion of the population for whom consumption is less than the poverty line.