Consider two developing countries. Country A, though quite poor, uses government resources and international aid to provide public access to quality education. Country B, though also quite poor, is unable to provide quality education for institutional reasons. The distribution of innate ability is identical in the two countries. a. Which country is likely to have a more positively skewed income distribution? Why? Plot the hypothetical income distributions for both countries on the same graph. b. Which country is more likely to develop faster? Why? Plot the hypothetical income distributions in 20 years for both countries on the same graph.
Continuous Probability Distributions
Probability distributions are of two types, which are continuous probability distributions and discrete probability distributions. A continuous probability distribution contains an infinite number of values. For example, if time is infinite: you could count from 0 to a trillion seconds, billion seconds, so on indefinitely. A discrete probability distribution consists of only a countable set of possible values.
Normal Distribution
Suppose we had to design a bathroom weighing scale, how would we decide what should be the range of the weighing machine? Would we take the highest recorded human weight in history and use that as the upper limit for our weighing scale? This may not be a great idea as the sensitivity of the scale would get reduced if the range is too large. At the same time, if we keep the upper limit too low, it may not be usable for a large percentage of the population!
Consider two developing countries. Country A, though quite poor, uses government resources and international aid to provide public access to quality education. Country B, though also quite poor, is unable to provide quality education for institutional reasons. The distribution of innate ability is identical in the two countries.
a. Which country is likely to have a more positively skewed income distribution? Why? Plot the hypothetical income distributions for both countries on the same graph.
b. Which country is more likely to develop faster? Why? Plot the hypothetical income distributions in 20 years for both countries on the same graph.
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