Inequality 1. Does greater income inequality mean more poverty? Why or why not?

Greater income inequality does not mean more poverty, it just means that there is a greater difference etween the rich and the poor. !. Why does income inequality matter? Income inequality matters ecause it demonstrates the disparity of income within a population. It also shows how many poor people there are relative to rich people and how different their income levels range. ". Why is the variance of income not a useful measure of income inequality? #he variance of income is not a useful measure of income inequality ecause the variance has no ounds, and is sensitive to the units we use to measure income. $. What is a %oren& 'urve? (ow is it related to a Gini coefficient? #he %oren& 'urve shows what share of income each cumulative population share controls from poorest to richest. The Gini coefficient of income inequality is the area between the perfect equity line and the Lorenz Curve divided by the area of the triangle below the perfect equity line. ). (ow do you calculate a Gini coefficient using micro household data? #he Gini coefficient is calculated y the ratio *+*,.. What/s a ig Gini coefficient of income inequality for a country? * ig Gini coefficient of income inequality for a country is 1.0 is there is perfect inequality. 1. Is the world Gini inde2 of income inequality larger or smaller than the Gini for most countries? Why? #he world Gini inde2 of income inequality is 0..! which would e categori&ed as 3very high inequality4 (uman Development 1. What is the (uman Development Inde2 measure, what are its components, and how is it calculated? #he (DI is an inde2 of inde2es, one for each outcome. Its components are the log of the gross national income 5G6I7, the life e2pectancy 5%87 and education 587. It is calculated as (DI 9 the third root of I5G6I7: I 5%87: I 587 !. *martya ;en wasn/t so sure a out the usefulness of having an (DI. (ow did <ah u ul (aq convince him to do it? Do you thin= the (DI is a useful inde2? Why or why not? (aq swayed ;en y persuading him that only a holistic development inde2 could shift policy ma=ers> and researchers> attention from economics to

human well eing. I thin= the (DI is a very useful inde2 ecause it incorporates all aspect of human development into one so countries can e analy&ed with an overall score. ". (ow much of the difference in (DI across countries can e e2plained y income? #here is a high correlation etween income and (DI since data suggests that the (DI rises sharply with per?capita income. (owever there are some wide variations in human development outcomes among countries even at the same income levels. $. Is income growth a sufficient condition for lowering the (DI? Why or why not? Income growth is not a sufficient condition for lowering the (DI ecause the increase in income is not universal and therefore does not apply to all countries. ). What are two e2amples of countries in which income and the (DI do not seem to go hand?in?hand, and e2plain why that might e. 8quatorial Guinea>s income ran= is very high yet it does not have a high (DI since its life e2pectancy is only )0.@ years and the average adult only has ).$ years of schooling. #he reason it has high income is ecause it has considera le oil wealth in the hands of very few people. *nother is ;outh *frica with the largest economy in *frica, ut a life e2pectancy of only )!.! years.