Answer to Question #106723 in Economics for Luna Penn

Question

Assume country A has a Gini coefficient of 0.4 and a Shorrocks measure of mobility of .8. Country B has a Gini coefficient of 0.3 and a Shorrocks measure of mobility of .4. Which country has a more serious problem with income inequality? Justify your answer.

Answer 1

As Country A has higher mobility, then there are more chances for citizens to reach higher income even if Gini coefficient is lower.

So, country B has a more serious problem with income inequality.