1. Measuring Inequality
Identify and understand how income inequality is measured – the Lorenz curve & Gini coefficients

2. Gini Coefficient Named after the Italian statistician, Corrado Gini
It aggregates the gaps between people’s incomes into a single measure.
If everyone in a group has the same income, the Gini coefficient is 0; if all income goes to one person, it is 1.

3. Gini Coefficient
The level of inequality differs widely around the world. Emerging economies are more unequal than rich ones.
Scandinavian countries have the smallest income disparities, with a Gini coefficient for disposable income of around 0.25.
At the other end of the spectrum the world’s most unequal, such as South Africa, register Ginis of around 0.6.

4. Gini coefficient UK

5. Trends in Gini coefficient
On all measures there was a substantial increase in inequality between (the Conservatives came into office in 1979 under Margaret Thatcher) and 1990

6. The Lorenz Curve
A Lorenz curve shows the % of income earned by a given % of the population.
A perfect income distribution would be one where each % of the population receives the same % of income.
Perfect equality is,  for example, where 60% of the population gain 60% of national income.

7. In the above Lorenz curve, 60% of the population gain only 20% of the income; hence, the curve diverges from the line of perfect equality of income.

8. The further away the Lorenz curve is from the 450 line, the less equal the distribution of income. In the example, the curve for country Y is further away from the line of equal distribution than the curve country X, implying a wider distribution of income.

10. Debate
To what extent is inequality necessary for a successful economy?
Look up the inequality data for your developing and developed countries
Read page 452 in the text book