Unit Four: Assignment 3: Problem 1 page 787
Here is the income distribution data for three countries:
India:
Lowest fifth = 8.5%
Second fifth = 12.1%
Middle fifth = 15.8%
Fourth fifth = 21.1%
Highest fifth = 42.5%
Czech Republic:
Lowest fifth = 10.5%
Second fifth = 13.9%
Middle fifth = 16.9%
Fourth fifth = 21.3%
Highest fifth = 37.4%
Mexico:
Lowest fifth = 4.1%
Second fifth = 7.8%
Middle fifth = 12.5%
Fourth fifth = 20.2%
Highest fifth = 55.4%
a. Using this information, draw a Lorenz curve for each country.
b. Which country has the most equal distribution of income?
c. Which country has the least equal distribution?
d. By looking at the three Lorenz curves, can you tell which country has the most progressive tax system? Why or why not?
- Refer to p. 771 for the format used in setting up a Lorenz curve. Be sure to put the % of households (families) on the horizontal axis and the cumulative % of income on the vertical axis.
- Study and compare the lowest and highest quintiles for each country. This makes it clear that the country with the most equal distribution of income is the Czech Republic.
- The country with the most unequal distribution of income is Mexico. For Mexico, the lowest 20% receive only 4.1% of income while the highest 20% receive 55.4% of income.
- The table doesn’t provide enough information to tell which country has the most and least progressive system of taxation. We would assume that Mexico, with the greatest inequality of income, does not have a very progressive system. In order to make a definitive determination, we would have to study the tax system of each country.
