Economic Devolpment

Todaro & Smith – Economic Development 12th edition

Problem set – Chapter 5

1. The following income distribution data are for Brazil.

Quintile Percent Share

Lowest 20% 3.0%

Second quintile 6.9%

Third quintile 11.8%

Fourth quintile 19.6%

Highest 20% 58.7%

Highest 10% 43.0%

(a) Carefully graph the Lorenz curve, labeling the axes.

(b) Explain how to find the Gini coefficient, graphically.

(c) Brazil’s national income is about $300 billion. What is the approximate dollar income of the bottom 20%? Bottom 40%?

(d) Brazil’s population is approximately 150 million. Suppose that  each household makes the average income for its quintile. What is the  level of poverty if the poverty line is $400 per capita?

(e) Suppose one percent of national income were transferred from the  richest 20% of households to the poorest 20% of households. Show the  effect on relative inequality. Under the same transfer, what is the  effect on poverty?