1. Measuring Income Inequality Princeton Williams Senior Economic Education Specialist
The opinions expressed are solely those of the presenters and do not reflect the opinions of the Federal Reserve Bank of Dallas or the Federal Reserve System.

2. Measures of Income Inequality
Income inequality measures look at how income is being distributed across a population.
Common measures
Shares of aggregate household income by quintile
Lorenz curve
Gini index (coefficent)

3. Share of Income Divide population into 5 groups (quintiles)
Measure the percentage of the nation’s total income that each group of households receives

4. Shares of Income in the U.S.
2007
2009
2010
Rounded
Lowest quintile
3.4
3.3 3
Second quintile
8.8
8.6
8.5 9
Middle quintile
14.7
14.6 15
Fourth quintile
22.8
23.2
23.4 23
Highest quintile
50.3
50.2 50
 Sum
100

5. Lorenz Curve Graphical representation of wealth distribution
Developed by Max Otto Lorenz in 1905
On the graph
Straight diagonal line shows an equal distribution of income
Lorenz curve shows the actual income distribution

6. Lorenz Curve

7. Lowest quintile 3
Bottom 20%
Second quintile 9
Bottom 40%
Middle quintile 15
Bottom 60%
Fourth quintile 23
Bottom 80%
Highest quintile 50
100%

8. Lorenz Curve

9. Gini Index Summary measure of income inequality
Developed by Corrado Gini in 1912
Indicates how much the income distribution differs from a proportionate distribution
Varies from 0 to 1
0 indicates perfect equality (a proportional distribution of income)
1 indicates perfect inequality (where one person has all the income and no one else has any)

10. Gini Index

11. Gini Index for the U.S.
2007
2009
2010
0.467
0.468
0.469

13. U.S. States and Territories
Lowest Gini Index
Alaska
0.409
Utah
New Hampshire
0.417
Hawaii
0.422
South Dakota
0.423
Iowa
0.426
Vermont
0.428
Highest Gini Index
Texas
0.473
Louisiana
0.478
Mississippi
0.48
Connecticut
0.481
New York
0.5
D.C.
0.542
Puerto Rico
0.544

14. Global Data

15. Next Steps
Use groupings of countries to look for common characteristics.
Look at what the number says and what it does not say.

16. Sources
Bishaw, Alemayehu and Jessica Semega, U.S. Census Bureau, American Community Survey Reports, ACS-09, Income, Earnings, and Poverty Data From the 2007 American Community Survey, U.S. Government Printing Office, Washington, DC, DeNavas-Walt, Carmen, Bernadette D. Proctor, and Jessica C. Smith, U.S. Census Bureau, Current Population Reports, P60-239, Income, Poverty, and Health Insurance Coverage in the United States: 2010, U.S. Government Printing Office, Washington, DC, 2011.