Modelling Inequality: Lorenz Curve

The Lorenz Curve is a graphical representation of the inequality of a distribution. It shows the cumulative percentage of the population or of the distribution's values on the vertical axis, and the cumulative percentage of the quantities (income, wealth, expenses, etc.) on the horizontal axis. It is a visual representation of the inequality that exists within a population by showing the gap between the ‘haves’ and the ‘have nots’. The vertical axis – the cumulative percentage of population or distribution – is plotted against the horizontal axis – the cumulative percentage of quantity (income, wealth, expenses, etc.). The Lorenz Curve is usually drawn as a line graph, although sometimes other shapes such as circles or polygons are used. When the Lorenz Curve is flat, it indicates that the distribution of the population or distribution is equal, i.e. each individual has the same amount of wealth and/or income as all others. When the Lorenz Curve is steep, it indicates that the distribution of the population is skewed toward one group, i.e. that some individuals have much more wealth and/or income than others. The Gini coefficient is a measure of inequality based on the Lorenz Curve. The higher the Gini coefficient, the greater the inequality in the population.