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How is income inequality measured? If a country’s distribution of income became more unequal over time,...

How is income inequality measured? If a country’s distribution of income became more unequal over time, would that affect economic progress? Why or why not?

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Expert Solution

Income inequality is measured with the help of the Gini coefficient and the Lorenz curve. Lorenz curve is a graphical representation of income inequality in a country, on one axis we have a cumulative portion of income and on the other axis, we have a cumulative percentage of income. This graph has a line of equality which is a 45-degree line and a deviated curve (which is the Lorenz curve) which represents the degree of income inequality in a country.

Lorenz curve is a graphical representation of the Gini coefficient. Gini coefficient is measured by calculating the ratio of the area between the line of equality and the Lorenz curve.

Yes, a country with a vast difference in income equality faces a lot of problems. There is a vast difference in the standard of living of the citizens. In such a country, the rich keep becoming richer, and the poor become poorer due to a lack of opportunities like health and education for the poor. This widely affects the economic growth and GDP of a nation.

Rahul Sunny answered 2 years ago
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