00:02
In this problem, we're going to be graphing the lawrence curve given two sets of data, one for 1979 and another for 1991.
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To begin, let's just keep track of the data that we're given.
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So for each quintile, we're given the percentage of income that that quintile holds.
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So for instance, the top quintile holds 39 % of the income that is there in the economy.
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While the bottom quintile, or the first quintile, they only have 7%.
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Now we're going to be using this data to draw the lawrence curve, and if you remember, the lawrence curve has the following axes.
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On the y -axis, we have the income quantiles, and for us the most important ones, so we have the 20th percentile, 40th percentile, 60th percentile, 80th percentile, and the hundredth percentile.
00:57
This corresponds to the first, second, third, fourth, and fifth quintiles.
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Now on the y -axis, we have the cumulative share of income.
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The data we're given, as we just talked about, is just the share of income.
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We need the cumulative share of income, and we need it starting from the 0th percentile all the way to 100th.
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And so let's first focus on the 1979 data and see how we would go about doing this.
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So if we want the cumulative share, we're going to be starting off at 0%, going all the way to 20th percentile.
01:30
So starting here, going all the way to here.
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In moving up to the 20th percentile, that is the first quantile, we see an increase of 7 % in the share of income.
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So our first point that we're going to plot is at 20th percentile, or the first quantile.
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That's going to be 7 % of the cumulative share.
01:51
So that's something like that.
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And then let's take a look at what happens in the second quintile.
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The second quintile has 11 .5 % of the income.
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And because we're curious about the cumulative share, we're going to add this 11 .5 with the 7.
02:07
So we're going to be adding these two together, and we're going to get as a result 18 .5.
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And so the second quintile has a cumulative share of 18 .5.
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So the 40th percentile has 18 .5 percent of the income.
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So that'll look something like this.
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Now let's take a look at the third quantile.
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They contribute 17 more percent.
02:31
And so we're going to add that 17 % to the 18 .5.
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And so when we do that, we are going to get a number of, let's see, 18 plus 17 is 35.
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So we're going to have 35 .5.
02:46
So the 60th percentile has 35 .5 % of the total income.
02:52
So let's say that's something like that.
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Now the fourth quantile contributes 24 .8 % of the income.
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And so going from here to here, we have 60 .3.
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So 60 .3 % of the total income belongs to the bottom 80th percentile of people.
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So 80 percentile, we go up to 60 .3.
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That will be something like this.
03:24
And lastly, we have to figure out how much is the top quantile contribute? well, they contribute 39 .7%...