Economics of Development: Gini Ratio Quiz

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Questions and Answers

What does the Gini ratio measure?

The population density of a country

A country's share of income relative to its population (correct)

The level of foreign investment in a country

The total income of a country

What is the range of the Gini ratio?

0 to 100

0 to 50

1 to 10

0 to 1 (correct)

In which year did the unweighted international inequality Gini ratio reach 0.56?

1993 (correct)

1870

2011

1988

What trend can be observed regarding global inequality from 1820 to 2013?

It fluctuated but generally increased Signup and view all the answers

Which year showed an international Gini ratio of 0.47?

1978 Signup and view all the answers

What does a Gini ratio of 0 indicate?

Perfect income equality Signup and view all the answers

Which source provides the Gini ratios for the years 2005 and 2016?

Milanovic Signup and view all the answers

What was the Gini ratio for global inequality in 2008?

0.55 Signup and view all the answers

What indicators are used to measure health in the context of poverty?

Child mortality and nutrition Signup and view all the answers

What assets are considered when measuring living standards?

Electricity, sanitation, drinking water, and flooring Signup and view all the answers

How is a person identified as multidimensionally poor?

If deprived of at least one-third of weighted indexes Signup and view all the answers

What is a key aspect of the Multidimensional Poverty Index (MPI)?

It does not take into account income-gap, only consequences of lack of income Signup and view all the answers

How long would it take for a poor country with an annual per capita income of $1,200 growing at 4% to catch up with a rich country growing at 3%?

300 years Signup and view all the answers

What is the Gini ratio indicative of regarding income inequality?

It has risen in both international and global contexts. Signup and view all the answers

What is a limitation of using per capita income (PCI) as an index of development?

It does not account for characteristics of underdevelopment. Signup and view all the answers

Which of the following measures offers a broader perspective on development?

Human Development Index (HDI) Signup and view all the answers

What does the World Bank's approach to tackling poverty emphasize?

Promotion of opportunities and empowerment Signup and view all the answers

How long could it take for the average poor country to reach the current living standards of rich countries?

150 years Signup and view all the answers

What is the primary purpose of Randomised Control Trials (RCTs)?

To determine the effectiveness of poverty alleviation strategies Signup and view all the answers

Which variable is NOT part of the Human Development Index (HDI)?

Environmental quality Signup and view all the answers

How is the index for each variable in the HDI calculated?

By normalizing the actual value between the minimum and maximum values Signup and view all the answers

What does the Multidimensional Poverty Index (MPI) primarily measure?

Multiple aspects of poverty Signup and view all the answers

What is the maximum value an HDI index can achieve?

1 Signup and view all the answers

Which of the following describes a limitation of RCTs?

They can affect the behavior of both treatment and control groups Signup and view all the answers

What aspect of education is considered in the MPI?

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

Which organization publishes the Human Development Report containing the HDI?

United Nations Development Programme Signup and view all the answers

What is the Headcount Index used to measure?

The number of people living below the poverty line Signup and view all the answers

Which of the following characteristics is NOT correlated with low per capita income (PCY)?

High levels of savings and investment Signup and view all the answers

What does the Poverty Gap measure?

The average income of people below the poverty line compared to the poverty line Signup and view all the answers

Which of the following statements about Purchasing Power Parity (PPP) is true?

PPP rates can be used to compare living standards between countries. Signup and view all the answers

Which method assesses the number of individuals without adequate income for minimal food intake?

Food Energy Method Signup and view all the answers

What is the poverty line defined by the World Bank?

$1.90 a day Signup and view all the answers

Why might per capita income (PCY) not be a complete measure of development?

It ignores income distribution and human development. Signup and view all the answers

What is the relationship between per capita incomes at PPP and measured by the official exchange rate in poor countries?

PCY at PPP is typically higher than official rates. Signup and view all the answers

Study Notes

Income Inequality and Gini Ratio

Sigma convergence lacks evidence across all countries.
Gini ratio quantifies a country's income distribution; ranges from 0 (perfect equality) to 1 (perfect inequality).

Gini Ratio Comparisons

For 1820, Gini ratios were recorded as 0.20 (unweighted) and 0.12 (population weighted).
Ratios have generally increased over time, reaching 0.56 (unweighted) in 1998 and stabilizing around 0.54 in 2013.

Per Capita Income (PCY) and Development

PCY rise alone doesn't equate to development; it overlooks income distribution and human factors.
PCY correlates with underdevelopment indicators like high agricultural labor, low savings, and limited technology.

Measuring Poverty

Headcount Index measures individuals living below the poverty line ($1.90/day at PPP), currently at 900 million.
Poverty Gap illustrates the income shortfall relative to the poverty line; a gap of 21% indicates significant deprivation.
Food Energy Method assesses those unable to afford minimum food intake.

Randomised Control Trials (RCTs)

RCTs analyze effective poverty alleviation strategies by comparing experimental groups with control groups.
Limitations include challenges in generalizing results, replication issues, and potential bias from participant awareness.

Human Development Index (HDI)

HDI evaluates development through life expectancy, educational attainment, and per capita income at PPP.
Values range from 0 to 1, reflecting the level of development with a higher index indicating better human development.

Multidimensional Poverty Index (MPI)

MPI considers education, health, and living standards, employing various indicators to assess poverty comprehensively.
A person is deemed multidimensionally poor if they lack at least one-third of weighted indexes; approximately 800 million are classified as such.

Catch-Up Potential for Poor Countries

For poorer nations to catch up with wealthier ones, they must achieve higher growth rates than the latter.
A poor country with a PCY of $1,200 growing at 4% may take 300 years to match a rich country's PCY of $25,000 growing at 3%.

Learning Objectives

Understand income inequality measurement and the development gap.
Differentiate international and global inequality.
Grasp purchasing power parity for real living standard comparisons.
Recognize varied poverty measurement methods and the scope of global poverty.
Comprehend RCTs' application in poverty research.
Analyze the construction of Human Development and Multidimensional Poverty Indices.

Chapter Summary

Income disparity between rich and poor nations is increasing; Gini ratios have risen over the past century.
900 million people live in absolute poverty on under $1.90/day.
PCY is not the sole measure of development but is indicative of underlying issues.
Both HDI and MPI provide broader development assessments.
The World Bank pursues poverty alleviation through empowerment and opportunity promotion.
Averaging 150 years may be required for poor countries to achieve rich countries' living standards.

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Description

Test your understanding of the Gini ratio and its implications for income distribution across countries. Explore the concepts of income inequality and sigma convergence as you answer questions based on the provided data. This quiz is essential for anyone studying the economics of development.