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LORENZ CURVE

Developed by Max O. Lorenz in order to describe the extent of inequality in a society. Imagine a graph in which the cummulated income (expressed as a percentage) is placed on the vertical axis and the cumulated number of households (expressed as a percentage) is placed on the horizontal axis. If there was perfect equality (so that the first 10 per cent of the households received 10% of the income and 20% of the households received 20% of the income, etc.) a diagonal line would be drawn across the graph. When actual income distributions are depicted on this graph the line ( a curve) departs from the line of perfect equality. For example, the bottom 20 per cent of households may receive only 4.5% of the total income. This line is the Lorenz curve and can be expressed mathematically. The Gini coefficient is an expression of the ratio of the amount of the graph located between the line of perfect inequality and the Lorenz curve to the total area of the graph below the line of equality. See: GINI COEFFICIENT / .

Last updated 2002--0-9-

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© Robert Drislane, Ph.D. and Gary Parkinson, Ph.D.
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