Lorenz Curve and Gini Coefficient
1 Lorenz curve (LC) and income distribution
Explanations
100
X-axis: Households/persons are
Income (cumulative %)
arranged in ascending order of income
(cumulative percentage).
Y-axis: Income (cumulative percentage)
The diagonal (45o) displays totally equal
distribution.
LC
The closer the Lorenz curve lies to the
diagonal, the more equal income is
0 100 distributed.
Households
(HH) / persons
(cumulative %)
2 Redistribution by the Government
21 From rich to poor 22 From poor to rich
(for ex. by progressive taxes) (for ex. by regressive taxes)
100 100
Income (cumulative %)
Income (cumulative %)
LC 2
LC 1
LC 1
LC 2
0 100 0 100
HH (cumulative %) HH (cumulative %)
LORENZGI.DOC Page 1 (of 2) 04/06/2016
3 The Gini coefficient (GC) as a measure of (in)equality
Explanations
C
100 Gini coefficient =
Income (cumulative %)
Area between the
diagonal and the LC
(coloured)
Total area under
the diagonal (= ABC)
LC The GC has a value between 0 and 1.
The bigger it is, the more unequally
income is distributed.
A B
HH (cumulative %)
Special cases
GC = 0 totally equal distribution
GC = 1 totally unequal distribution
LORENZGI.DOC Page 2 (of 2) 04/06/2016
