Income Distribution

Lorenz Curve

What is it? Illustrates the percentage of distribution of income

The vertical axis = the total income of the economy in 20% increments % of income % of population

The horizontal axis = the cumulative percentage of people in 20% increments % of income % of population

The blue, 45 degree line is the line of perfect equality % of income % of population

That means 20% of the population receives 20% of the income % of income % of population

That means 60% of the population receives 60% of the income % of income % of population

Do any countries income distribution actually look like this? % of income % of population

The red line represents unequal distribution % of income % of population

This red line is called the Lorenz Curve % of income % of population

Notice at the point, 60% of the population receives only 20% of the income % of income % of population

Another way of saying this is that 40% of the population receives 80% of the income % of income 80% % of population 40%

Or the top 40% receive 80% of the income % of income 80% % of population 40%

Worksheet Practice

Gini Index Represented by the area above the Lorenz Curve to the line of equal distribution (A). % of income % of population

Gini Index (coefficient) A / (A+B) A Gini of 0 means perfect income equality, and a Gini of 1 means one person owns all the income % of income % of population

Gini Index’s around the world Haiti = .59 Nicaragua = .62 Sierra Leone = .66 Sweden = .23 United States = .45