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The following income distribution data are for Brazil. Quintile Percent Share First quintile 2.0% Second quintile...

The following income distribution data are for Brazil.

Quintile

Percent Share

First quintile

2.0%

Second quintile

7.9%

Third quintile

11.8%

Fourth quintile

19.6%

Fifth quintile

58.7%

Highest 10%

43.0%

Brazil’s national income is about $350 billion. Assume that total national personal income is approximately equal to national income. (a) What is the approximate sum of incomes for everyone in the bottom 20%? (b) Bottom 40%?

Solutions

Expert Solution

One common way of measuring income inequality is to rank all households by income, from lowest to highest, and then to divide all households into five groups with equal numbers of people, known as quintiles. This calculation allows for measuring the distribution of income among the five groups compared to the total. The first quintile is the lowest fifth or 20%, the second quintile is the next lowest, and so on.

a) Sum of Incomes for everyone in the bottom 20% = Sum of Income of the First Quintile.

Total income = $350 Billion.

Share of 1st Quintile = 2%

So Sum of incomes for everyone in the bottom 20% = 2% * $350 Billion = $7 billion

b) Sum of incomes for everyone in the bottom 40% = Sum of income of First and Second Quintile.

Share of 1st Quintile = 2%

Share of Second Quintile =7.9%

Total share of First and Second Quintile = 2% + 7.9% = 9.9%

So Sum of incomes for everyone in the bottom 40% = 9.9% of $350 Billion = $34.65 billion.

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Rahul Sunny answered 6 months ago
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