Do countries with more income inequality have lower unemployment rates? Table 2.4 contains the following information for ten countries during the 1980-1995 time period: change from 1980 to 1995 in ratio of the average wage of the top 10% of all wage earners to the median wage, and change from 1980 to 1995 in unemployment rate. 

a. Explain why the ratio of the average wage of the top 10% of all wage earners to the median measures income inequality.

b. Do these data help to confirm or contradict the hypothesis that increased wage inequality leads to lower unemployment levels?

c. What other data would you need to be more confident that increased income inequality leads to lower unemployment?

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TABLE 2.4 Data on Income Inequality Change in Wage Inequality Ratio Country Germany France Italy Japan Australia Sweden Canada New Zealand Britain U.S. -6.0% -3.5 1.0 0.0 5.0 4.0 5.5 9.5 15.6 15.8 Change in Unemployment Rate 6.0% 5.6 5.2 0.6 2.4 5.9 2.0 4.0 55 00 2.5 -1.8