Consider the following
Image two communities: Mazushi and Muyrico.
| Mazushi has 10 residents | Muyrico has 10 residents | ||||
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1-WHAT IS THE INCOME INEQUALITY RATIO FOR EACH COMMUNITY?
To compute the inequality ratio, we can use different or employ different statistical models. There are several statistical tools, which are useful in measuring income inequality in a society or a country. The most complex of these instruments or tools, which are used to measure income inequality, can produce the most accurate results. However, for this assignment, we would not require a complex and sophisticated mathematical or statistical instrument/equation to measure inequality in Mazushi and Muyrico.
For the computation of income inequality, in the given communities, I intend to use the KuznetsCoefficient, which is developed to measure income inequality.
For this computation, we will require percentages of any group in society. For instance, we will require a percentage related to the size of the group (number of residents) and a percentage regarding the size of income that selected group earns.
Mazushi
For Mazushi, the group of residents, which we have selected, is a low earning group. It is essential to understand that the selection of a group does not affect the outcome of computation.
Population size (in %) = 5/10 *100 = 50%
Income Earned (in %) = 30000/120000 * 100 = 25%
Population size – Income earned = 25%…… equation/value (1)
Now dividing the obtained value (1) with two (2) = 0.125
Muyrico
For the society Muyrico, we have selected low-income group for the computation of income inequality.
Population size in (percentage) = 5/10 * 100 =50%
Income Earned (in percentage) = 50000/300000 *100 = 17%
Population size – Income earned = 50%-17% =33%……… value/equation (1)
Now dividing the obtained value/equation (1) with two (2) = 33%/2 = 0.1666
It is essential to understand that the value of Kuznets Coefficient ranges from 0 to 1. If the estimation is close to the value of 1, it means that income inequality is high.
2-WHICH COMMUNITY HAS UNEQUAL INCOME DISTRIBUTION AND WHY?
The arithmetic reveals that Muyrico has greater or more income inequality than Mazushi. The value of Kuznets Coefficient, for Mazushi, is 0.125, whereas the value of Kuznets Coefficient is 0.166. As the value of Kuznets Coefficient for Muyrico is closer to the value of 1, in comparison to Mazushi, which value of Kuznets Coefficient is 0.125, therefore, Muyrico has greater income inequality.
Why?
Income equality is generally a result of various factors and not just a single factor. For instance, because of rampant corruption, there could create inequality in society. Various studies have attempted to identify major contributors to income inequality. Few of these major factors are economic policy, the structure of the economic system, demography, resources, corruption and population distribution. We have noticed, repeatedly, that as the size of the city starts to grow, so does the income inequality. In this case of Muyrico, the cause could be the allocation of resources to residents or access to economic/financial/corporate opportunities. Other reasons could be geography, economic policy, or corruption.
3-WHY MIGHT SOMEONE PREFER TO LIVE IN MUYRICO, INSTEAD OF MAZUSHI?
Someone may prefer to live in Muyrico because of the income and economic opportunities Muyrico produces. Cities or societies with sizeable income inequality tend to produce more lucrative opportunities. However, to access and exploit these opportunities requires various kinds of resources and instruments. Sometimes, income inequality is strongly associated with corruption, which favors people who have capital (social and financial). Therefore, an individual would prefer to live in Muyrico, where he/she could use his/her capital (social and financial) to access and exploit various kinds of economic and financial opportunities
There could be other reasons too, such as lifestyle. It is also a fact that societies with greater income inequality offer a very flamboyant lifestyle.
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