1. Income Distribution

2. Lorenz Curve

3. What is it?
Illustrates the percentage of distribution of income

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

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

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

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

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

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

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

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

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

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

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

15. Worksheet Practice

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

17. 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

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