In: Economics

What are the key criticisms of the Gini coefficient?

Key criticisms of the Gini coefficient are:

The Gini coefficient measured for a large economically diverse
country will generally result in a much higher coefficient than
each of its regions has individually. For this reason the scores
calculated for individual countries

within the EU are difficult to compare with the score of the entire
US.

Comparing income distributions among countries may be difficult because benefits systems may differ. For example, some countries give benefits in the form of money while others give food stamps, which may not be counted as income in the Lorenz curve and therefore not taken into account in the Gini coefficient.

The measure will give different results when applied to
individuals instead of households. When different populations are
not measured with consistent

definitions, comparison is not meaningful.

As for all statistics, there will be systematic and random errors in the data. The meaning of the Gini coefficient decreases as the data become less accurate. Also, countries may collect data differently, making it difficult to compare statistics between countries.

Economies with similar incomes and Gini coefficients can still
have very different income distributions. This is because the
Lorenz curves can have different shapes and yet still yield the
same Gini coefficient. As an extreme example, an economy where half
the households have no income, and the other half share income
equally has a Gini coefficient of ½; but an economy with complete
income equality, except for one wealthy household that has
half

the total income, also has a Gini coefficient of ½.

Q1 What is Gini coefficient? Explain how Gini coefficient is
derived from the Lorenz curve?

Which one of the following statements about the Gini coefficient
is not true? A. The Gini coefficient increases as income inequality
increases. B. The Gini coefficient equals zero when there is
perfect equality. C. The Gini coefficient must fall when the amount
of income in an economy increases. D. The Gini coefficient equals
one when there is perfect inequality. E. The Gini coefficient
reflects the data shown in the Lorenz curve.

3) For each country, why is the market Gini coefficient greater
than the disposable income Gini coefficient?
3 B) Why must it always be the case that the marginal cost (MC)
curve crosses the average cost (AC) curve at its minimum point?

Demonstrate how the Gini coefficient measures the inequality of the
in- come distribution. What can it tell us about poverty?

give an intuitive explanation of how the Gini coefficient and
Lorenz curve is measured and what we can learn about income
inequality from it. (For example: What do the larger and smaller
values of this measure mean? Which parts of the income distribution
do this measure use?)

Why
is Gini coefficient difficult to understand in microeconomics.
Write a paragraph explaining what is difficult to understand about
it.

Draw the Lorenz curve and explain what the gini coefficient and
robinhood index are. Explain differences between the two, and how
it is an effective index. Thoroughly explain each index. Also
discuss the Lorenz curve and its relation to the gini cofficient
index and the robinhood index.

Demonstrate how the Gini coefficient measures the inequality of
income distribution. What can it tell us about poverty?

According to the US Census Bureau, the Gini Coefficient in the
United States was 0.397 in 1967, and 0.480 in 2014. The Gini
coefficient is a measure of inequality that ranges from 0 to 1,
where higher numbers indicate greater inequality. According to the
World Bank, countries with Gini coefficients between 0.5 and 0.7
are characterized as highly unequal. Using the
idea that Incentives Matter, analyze BOTH the pros of some
income inequality and the cons of excessive income inequality....

Describe a tax change that would cause the Gini coefficient to not
change very much and explain why.

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