Income Inequality
Lorenz Curves and Gini Coefficients
Lorenz Curve
• Graphical representation of the inequality of
income or wealth developed by Max Lorenz in
1905.
• Drawn as a cumulative income/wealth curve.
• Population is divided into quintiles:
E.g. the poorest 20% of the population is grouped
into the 1st quintile and the richest 20% into the
5th quintile. The same can be done in deciles.
Example
Household Quintile
Share of Disposable
Income
1st Quintile (poorest)
3%
2nd Quintile
7%
3rd Quintile
12%
4th Quintile
27%
5th Quintile (richest)
51%
Cumulative share of
income