Question

1. The table below indicates the incomes of 20 individuals in the Nkoranza district in Ghana.

1700	710	220	80	470	200	370	50	1150	120
400	1300	310	590	180	430	1450	280	330	510

1. Use the data in the table to estimate the Kuznets ratios from both the Quintiles and Deciles.
2. Explain the meaning of the Kuznets ratios estimated and comment on them.

Answer 1

It shall be noted that Kuznet's ratio is a measure of inequality between a high and low-income group of a country and is measured as the ratio of income of top 20% and income of the bottom 40%

In the question, the income of the 20 persons has been provided.

Individual	Income	%Population
1	1700	5%	Top 20%
2	1450	5%
3	1300	5%
4	1150	5%
5	710	5%
6	590	5%
7	510	5%
8	470	5%
9	430	5%
10	400	5%
11	370	5%
12	330	5%
13	310	5%	Bottom 40%
14	280	5%
15	220	5%
16	200	5%
17	180	5%
18	120	5%
19	80	5%
20	50	5%

Arrange the income in the descending order and estimate the share of income earned by top20% and the share of income earned by the bottom 40%

The total income is 10850

The share of income by the top 20% = 5600/10850

The share of income by the bottom 40% = 1440/10850

Hence, Kuznet's ratio = (5600/10850)/(1440/10850) = 3.888889

b.

Kuznet's ratio is a measure of income inequality. It measures the difference between high & low-income group in terms of the ratio of income of the top 20% and income of the bottom 40%

The value 3.888889 indicate that top20% population earn 3.888889 times higher income than bottom 40% population.

Thus, there exists grave inequality in the economy concerned.