Assignment
Instructions:
All of the data for this problem set can be found in the PS2 folder in Canvas. Please fill out this Excel file and copy each of the four figures described below into the worksheet that has a title matching the figure number. We will ask you to upload one Excel file at the end of the problem set. For the open-ended questions, we recommend typing your response in this Word document and then copying your answer into the Canvas quiz.
Problem 1: Lorenz Curves and Gini Coefficients
Using the KwaZulu-Natal Income Dynamics Study (KIDS) survey, we will examine the evolution of inequality in South Africa between 1993 and 2004. (Note: the data in PS2 Excel template file has been changed slightly. Don't use data in PS1! All the numbers are reported in 2000 real values - there is no need to use any CPI conversion.)
a) Plot the Lorenz curves for per-capita expenditures for 1993, 1998 and 2004 in Excel. Put the three Lorenz Curves on a single graph. While there are multiples ways to generate the Lorenz Curves, we would like you to divide your sample into ten deciles of per-capita expenditures (so you have 10 points on the horizontal axis). The following table may help you plot the Lorenz curve for each year. Please copy this graph into the worksheet titled "Figure 1A" in the Excel template.
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Income Decile
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Percent of Population
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Cumulative percent of Population
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Percent of Income
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Cumulative Percent of Income 1993
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Cumulative Percent of Income 1998
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Cumulative Percent of Income 2004
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o
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o
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0.1
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10%
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0.2
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10%
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0.3
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10%
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0.4
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10%
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0.5
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10%
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0.6
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10%
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0.7
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10%
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0.8
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10%
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0.9
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10%
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1
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10%
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b) Based on your Lorenz Curves, briefly explain what you conclude about the evolution of inequality in South Africa.
c) Calculate and report the Gini coefficient for 1993, 1998 and 2004 in the table below. (Do not use the graphical method to find the GINI)