CAS EC 101 Lecture Notes - Lecture 13: Lorenz Curve, Regional Policy Of The European Union, Gini Coefficient
1 May 2018
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Objective 1: Final Exam (Wednesday, December 20th from 12:30-2:30 in Morse Auditorium)
• 60 multiple choice questions
o (~18 questions) 30% – Midterm 1
o (~18 questions) 30% – Midterm 2
o (~24 questions) 40% – Midterm 3
• Primarily concentrate on slides and notes
Objective 2: Lorenz Curve
• Lorenz Curve – shows the general income distribution of a country at any point in time
o Represented by a bowed out curve
o
o Over time, the curve has continued to bow out as income is distributed even more
unequally
• Perfect Equality – when certain percentage of the population will make that specific
percentage of income
o Represented by a perfectly diagonal line at a 45 degree angle
o ex: 20% of the population would make 20% of the income
o However, this is unrealistic
• Question: how has income shares changed over time?
o Only the fourth and fifth quintiles have held their own over the decades
o The first, second and third quintiles slightly peaked in the late 20th century but has
fallen in recent years
Objective 3: Yellen Article (responsible for reading this on Blackboard)
• Reasons for Increasing Income Inequality
o 1. Skill-Biased Technological Change – a greater demand for individuals in skill
and technology based careers (ex: engineering, mathematics, computer science)
▪ Real Hourly Wages for Selected Percentiles
▪ ex: 80th percentile means 80 percent of wage earners had a real hourly
wage below them
o 2. Globalization – created as more people are competing in a less skilled labor
market
▪ The patterns of U.S. trade and immigration (illegal and legal)
find more resources at oneclass.com
find more resources at oneclass.com
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Document Summary
Objective 3: yellen article (responsible for reading this on blackboard: reasons for increasing income inequality, 1. Globalization created as more people are competing in a less skilled labor market: the patterns of u. s. trade and immigration (illegal and legal, 3. Deunionization the idea that unions have become less important and useful. Increasing importance of fringe benefits compensation is not entirely monetary: ex: health insurance, 4. Changes in living arrangements/demographics has a direct impact on income earned: ex: single parents (2 income household 1 income household), older population (less workers) Coefficient of 0: ex: if income was solely held by one individual, it would result in a gini. Coefficient of 1: formula = (cid:3002)(cid:3002)+(cid:3003, high gini coefficients are more common in developing countries, alternative measure of inequality, formula = (cid:3041)(cid:3030)(cid:3042)(cid:3040)(cid:3032) (cid:3045)(cid:3032)(cid:3030)(cid:3032)(cid:3032)(cid:3031) (cid:3029) (cid:3047) (cid:3032) (cid:3045)(cid:3030) (cid:3032)(cid:3046)(cid:3047) (cid:2869)(cid:2868)% (cid:3041)(cid:3030)(cid:3042)(cid:3040)(cid:3032) (cid:3045)(cid:3032)(cid:3030)(cid:3032)(cid:3032)(cid:3031) (cid:3029) (cid:3047) (cid:3032) (cid:3043)(cid:3042)(cid:3042)(cid:3032)(cid:3045)(cid:3032)(cid:3046)(cid:3047) (cid:2869)(cid:2868)%
