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?