This document discusses concepts related to economic development, income distribution, and inequality. It introduces the Lorenz curve and Gini coefficient as tools to measure inequality. It notes that while growth can occur without increasing inequality, evidence shows Gini coefficients do not tend to change significantly over time. The key issue is economic mobility rather than static income categories, and poverty levels have significantly decreased in many countries in recent decades.

2. Lecture 11
Economic Development

3. Income Distribution
Lorenz Curve
Gini Coefficient

4. Income
Consumption
Per Capita
Per Household
Inequality

5. Inequality
0
25
50
75
100
Lowest Highest
Same Average

6. $ Income
Consumption
More difference in Income
than Consumption

7. Per
Capita
Per
Household
Bob $75,000 $75,000
Bill $55,000 $100,000
Ann $45,000 married
Average $58,333 $87,500

8. Quintiles - 20%
0
15
30
45
60
Bottom 20% Second 20% Third 20% Fourth 20% Top 20%
Bangladesh Mexico U.S.

9. Lorenz Curve
Cumulative
% of
consumption
Cumulative % of people
0%
100%
50%
25%
75%
0% 50% 100%25% 75%
45 degree
line
perfect
equality

10. Geni Coefficient
Cumulative
% of
consumption
Cumulative % of people
45 degree
line
perfect
equality
0%
100%
50%
25%
75%
0% 50% 100%25% 75%
A
B
A
A + B
0 = perfect
equality
1 = perfect
inequality
.25
to
.65

11. Can you have growth
without increasing
inequality?
Growth vs. Inequality

12. $
Rich
Poor
Rich
Poor
Simon
Kuznets
W. Arthur
Lewis

13. Ginis don’t seem to
change much
Evidence

16. Inequality is not the
same thing as
poverty

18. 1981: 44%
2015: 9.6%
Drop of 78% in 34 years

21. Poverty is relative
my neighbor
Poverty is absolute
me yesterday

22. Mobility is really
the issue
Categories are
constant

23. Rich in a poor country
Poor in a rich country
Ginis compare within
countries not between
countries

24. $0.00
$3.00
$6.00
$9.00
$12.00
$15.00
Bangladesh Mexico U.S
Poverty Line

25. Head-Count Index