Economics of Development Chapter 2

Questions and Answers

What does a Gini ratio of 0 signify?

Minimal economic variance

High income disparity

Extreme inequality

Perfect equality (correct)

Which year saw the highest unweighted Gini ratio in the provided data?

2011

1988 (correct)

2005

1913

What is the range of the Gini ratio?

0 to 10

0 to 5

0 to 100

0 to 1 (correct)

Which of the following best describes the term 'sigma convergence'?

Reduction of income differences among countries Signup and view all the answers

In what year did the population-weighted Gini ratio first exceed 0.50?

1952 Signup and view all the answers

What does a Gini ratio of 1 represent?

Perfect inequality Signup and view all the answers

Which of the following years had an identical unweighted Gini ratio according to the data provided?

1929 and 1938 Signup and view all the answers

Based on the data, which researcher provided a value for global inequality in 2002?

Milanovic Signup and view all the answers

What is the primary indicator used to define income distribution between countries as categorized by the World Bank?

Per capita income Signup and view all the answers

Which of the following measures can be derived from the Lorenz Curve?

Gini ratio Signup and view all the answers

What is indicated by a relative gap in income distribution?

The ratio of per capita income in high income countries to low income countries Signup and view all the answers

Which condition is required for sigma convergence in income distribution?

Poor countries grow faster than rich countries Signup and view all the answers

What does the historical rise in the development gap primarily indicate?

The widening income disparity between nations Signup and view all the answers

What is the ratio of per capita income in high income countries to low income countries according to recent data?

60:1 Signup and view all the answers

In measuring poverty, which index accounts for multiple deprivations a person may face?

Multidimensional Poverty Index Signup and view all the answers

Which of the following best describes absolute gap measures?

Quantifies the gap between the richest and poorest countries Signup and view all the answers

What is the main limitation of using per capita income (PCI) as an indicator of economic development?

It ignores factors that contribute to underdevelopment. Signup and view all the answers

What does the Gini ratio indicate in terms of income inequality?

It quantifies the growth of income inequality over time. Signup and view all the answers

How long might it take for an average poor country to reach the living standards of today's rich countries?

150 years Signup and view all the answers

Which indices are mentioned as providing broader measures of development compared to traditional income measures?

Human Development Index and Multidimensional Poverty Index Signup and view all the answers

What approach does the World Bank take in addressing poverty?

Promoting opportunities, empowerment, and security Signup and view all the answers

Which region had the highest poverty gap percentage at $1.90 a day in 2012?

Sub-Saharan Africa Signup and view all the answers

What is the Sustainable Development Poverty Reduction Target regarding extreme poverty?

To eliminate extreme poverty by 2030 Signup and view all the answers

What is a key strategy of the World Bank to tackle poverty?

Promoting opportunity by expanding asset bases for the poor Signup and view all the answers

Which income group had the lowest poverty gap at $1.90 a day in 2012?

Europe and Central Asia Signup and view all the answers

What does the growth rate necessary to meet the poverty reduction target depend on?

Initial poverty rate and elasticity of poverty rate with respect to growth Signup and view all the answers

In which region was the poverty gap for low income categorized in terms of percentages?

18.6% Signup and view all the answers

What role does empowerment play in the World Bank's approach to poverty reduction?

To strengthen participation of poor people in decision-making Signup and view all the answers

What security measure is emphasized in tackling poverty according to the World Bank?

Insurance against economic shocks and disasters Signup and view all the answers

What is the primary purpose of Randomised Control Trials (RCTs) in the context of poverty alleviation?

To identify the most effective interventions against poverty Signup and view all the answers

How is the Human Development Index (HDI) calculated?

It is derived from the average of three normalized indexes Signup and view all the answers

What is a limitation of Randomised Control Trials (RCTs) mentioned in the content?

They may lead to behavioral changes in participants Signup and view all the answers

Which dimensions are used to measure the Multidimensional Poverty Index (MPI)?

Health, education, and standard of living Signup and view all the answers

Which of the following is NOT a variable used in calculating the Human Development Index (HDI)?

Infant mortality rate Signup and view all the answers

What does the formula for computing an index in the HDI depend on?

A set maximum and minimum value for each variable Signup and view all the answers

In the context of the Multidimensional Poverty Index (MPI), education is assessed through which indicators?

Years of schooling and child attendance Signup and view all the answers

Which organization publishes the Human Development Index (HDI)?

United Nations Development Programme Signup and view all the answers

Study Notes

Development Gap and Income Distribution

Concept of development gap exists between the "North" (developed) and "South" (developing) countries.
Income categories defined by the World Bank: low, middle, and high-income countries.
Various measures of development gap: absolute income gap, relative income gap, variance, standard deviation of per capita incomes, and Gini ratio from Lorenz Curve.
Historical trends show a widening development gap.

Measures of Inequality and Historical Trends

The absolute gap between the richest and poorest countries has increased over time.
The relative gap, with a current ratio of per capita income between high and low-income countries at 60:1, has also widened.
Sigma convergence, necessary for reducing income dispersion, shows no consistent evidence across all countries.
Gini ratio ranges from 0 (perfect equality) to 1 (perfect inequality); variability indicates skewed income distribution.

Gini Ratio Overview

Historical Gini ratios from 1820 to 2013 show gradual increases in inequality.
Examples of ratios include 0.20 in 1820 rising to 0.54 by 2013 for unweighted international inequality.

Poverty Measurement

Poverty gap at $1.90 a day (2011 PPP) shows significant variance across regions, with Sub-Saharan Africa at 16.47%.
Meeting the Sustainable Development Goal of eradicating extreme poverty by 2030 hinges on economic growth rates and initial poverty rates.

Grass Roots Poverty Reduction

World Bank focuses on: expanding assets for the poor, improving empowerment and decision-making, and enhancing security against economic shocks and disasters.

Randomised Control Trials (RCTs)

RCTs are employed to discover effective poverty alleviation methods; involve experimental groups against control groups to assess interventions.
Limitations of RCTs include challenges in generalizability and potential changes in behavior due to participation.

Human Development Index (HDI)

HDI integrates life expectancy, educational attainment, and per capita income at PPP.
The index ranges from 0 (minimum) to 1 (maximum), reflecting overall human development status.

Multidimensional Poverty Index (MPI)

The MPI is constructed based on education, health, and standard of living, allowing a comprehensive understanding of poverty's dimensions.
Education evaluates years of schooling and child attendance.

Learning Objectives Reflection

Key measures of income inequality and the distinction between international and global inequality are essential for understanding development.
Purchasing Power Parity (PPP) is crucial for comparing living standards internationally.
Various metrics, including per capita income, RCTs, and indices like HDI and MPI, are vital for assessing and addressing poverty.

Chapter Summary Insights

Income disparities between rich and poor countries continue to grow, with 900 million people living on less than $1.90 daily.
Per capita income, while a key indicator, does not fully capture development needs or changes.
Strategies by the World Bank emphasize opportunities, empowerment, and security to tackle poverty effectively.
Economic catch-up for poorer countries can take an estimated 150 years to achieve the living standards of currently wealthy nations.

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Description

Explore Chapter 2 of the Economics of Development, focusing on the development gap and measurement of poverty. This quiz covers income distribution, measures of inequality, and the assessment of per capita incomes at purchasing power parity. Additionally, discover insights into sustainable development goals related to poverty reduction.