EC 320: Economics of Less-Developed Regions Harvard Case Solution & Analysis

EC 320: Economics of Less-Developed Regions Case Solution

Income Distribution

It is expected that in order to identify the level of income distribution among the residents of country A and Country B, Gini Index is identified. (Refer Excel Sheet) With the help of Gini Index inequality with respect to the income distribution could be identified. For this purpose, Lorenz Curve graph is also drawn among the cumulative percentage income and cumulative percentage of population.

It is expected that Gini index is the standard economic measure of inequality and higher index figure will represent the higher income inequality. As the country B has higher index figure therefore it is expected that country B has greater inequality with respect to the income distribution among the residents of Country B as compared to the residents of the country A.

Gini Index measures the distribution of income among the residents of a particular country therefore it is supposed that coefficient of Gini does not dependent upon the total income of a particular country. Hence, if a country A ten times richer than the country B, in that case Gini index will also remain same as we calculated earlier.

It is a common observation that difference between the maximum and minimum income range of the residents of a particular country is a best estimate in order to identify the relative inequality of the income distribution in that particular country but it is expected that it violates the principle of Dalton principle as it follows the principle of regressive transfers which indicates that income transfer from one individual to other individuals and it explain also over all conceivable distribution of income .

 It is expected that poverty headcount ratio is also identified under the two different scenarios and in both scenarios poverty headcount ratio is approximately same. (Refer Excel Sheet)

It is expected that poverty headcount ratio is not a proper measure of relative inequality as it does not show the degree of poverty and it also does not explain the distribution of income between poor. In addition to this it also does not explain the improvements at the small scale with thin the poverty barrier therefore poverty headcount ratio is considered as an ineffective measure of relative inequality.

HUMAN DEVELOPMENT AND GNI (PER CAPITA) PPP OF CHINA

According to the report of World Bank on human development China stands in rank 90^th in the list of high human development countries with a rate of almost 73% in human development index. By looking at the index of gross national income (per capita), it is clear that China stands 78^th position in the world out of almost 200 countries, according to the world bank report in the year 2014.

Long and healthy life

Knowledge

Decent standard of living

While GNI (per capita) total income of a country generated by the production of a goods and services provided within a year less any income paid by the country to the rest of the world in consideration of the ownership of factors of production......................

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