Inequalities of Development Lorenz Curve

Measurements of Income Distribution Lorenz Curve: A curve showing the proportion of national income earned by a given percentage of the population. e.g what proportion of national income is earned by the top 10% of the population?

Lorenz Curve % of National Income This line represents the situation if income was distributed equally. The poorest 10% would earn 10% of national income, the poorest 30% would earn 30% of national income. 30% 10% 10% 30% Percentage of Population

Lorenz Curve % of National Income In this second example, the Lorenz curve lies further below the line of equality. Now, the poorest 30% only earn 7% of the national income. The Lorenz Curve will show the extent to which equality exists. The greater the gap between the line of equality and the curve the greater the degree of inequality. In this example, the poorest 30% of the population earn 20% of the national income. 20% 7% 30% Percentage of Population

The Lorenz Curve The Lorenz curve represents the distribution of income; it expresses the relationship between cumulative percentage of households and cumulative percentage of income.

Lorenz Curve for the United States, 1998

World distribution of wealth (PPP) Lorenz Curve 100 90 80 70 60 50 40 30 20 10 Pop’ Wealth (PPP)   1988 1993 10 0.9 0.8 20 2.3 2 50 9.6 8.5 75 25.9 22.3 85 41 37.1 90 53.1 49.2 95 69.8 66.3 99 91.7 91.5 100 Line of total integration Cumulative Wealth (PPP) 10 20 30 40 50 60 70 80 90 100 Cumulative Global Population

World distribution of wealth Lorenz Curve 100 90 80 70 60 50 40 30 20 10 Pop’ Wealth (PPP)   1988 1993 10 0.9 0.8 20 2.3 2 50 9.6 8.5 75 25.9 22.3 85 41 37.1 90 53.1 49.2 95 69.8 66.3 99 91.7 91.5 100 The richest 10% possessed 46.9% of the world wealth in 1988. Line of total integration Cumulative Wealth (PPP) 10 20 30 40 50 60 70 80 90 100 Cumulative Global Population

World distribution of wealth Lorenz Curve 100 90 80 70 60 50 40 30 20 10 Pop’ Wealth (PPP)   1988 1993 10 0.9 0.8 20 2.3 2 50 9.6 8.5 75 25.9 22.3 85 41 37.1 90 53.1 49.2 95 69.8 66.3 99 91.7 91.5 100 The richest 10% possessed 50.8% of the world wealth in 1993. Line of total integration Cumulative Wealth (PPP) 10 20 30 40 50 60 70 80 90 100 Cumulative Global Population

World distribution of wealth (PPP) Lorenz Curve 100 90 80 70 60 50 40 30 20 10 Pop’ Wealth (PPP)   1988 1993 10 0.9 0.8 20 2.3 2 50 9.6 8.5 75 25.9 22.3 85 41 37.1 90 53.1 49.2 95 69.8 66.3 99 91.7 91.5 100 Line of total integration Cumulative Wealth (PPP) The greater this area the more unequal the distribution 10 20 30 40 50 60 70 80 90 100 Cumulative Global Population