Lorenz Curve
Definition:
The Lorenz curve is a way of showing the distribution of income (or wealth)
within an economy. It was developed by Max O. Lorenz in 1905 for representing wealth
distribution.
The Lorenz curve shows the cumulative share of income from different sections of the
population.
If there was perfect equality – if everyone had the same salary – the poorest 20% of the
population would gain 20% of the total income. The poorest 60% of the population
would get 60% of the income.
Diagram of Lorenz curve
In this Lorenz curve, the poorest 20% of households have 5% of the nation’s total income.

The poorest 90% of the population holds 55% of the total income. That means the richest 10% of
income earners gain 45% of total income.
Shift in the Lorenz Curve
In this example, there has been a reduction in inequality – the Lorenz curve has moved closer to
the line of equality.
The poorest 20% of the population now gain 9% of total income
The richest 10% of the population used to gain 45% of total income but now only get
25% of total income.

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- Winter '17
- Lorenz Curve