The Lorenz curve is a

graphical device used

to represent
distributional
inequality. The Gini
coefficient is a
numerical measure of
inequality based on the
Lorenz curve. These
measures can be used
to represent any sort of
distributional inequity.
The diagonal line represents exact
equality in wealth distribution. Along
that line, as shown to the left, the
poorest 10% of the households own
10% of the wealth, 50% of the
wealth is owned by the poorest
50%, and finally 80% of the wealth
is in owned by the poorest 80%.
This would also mean that the
richest 20% only own 20% of the
wealth, making them no different
from the poorest 20%. As we'll see
below, when wealth is distributed
unequally (as it always is) the line
curves downward, below the
diagonal. The greater the inequality,
the more the line curves away from
the diagonal.
The purple line represents a society
where the poorest 30% own only 2% of
the wealth, while in the society
represented by the green line, the
poorest 30% own 20% of the wealth.
When we look at the poorest 70% they
only own 20% of the wealth, while in
the society represented by the green
line, the poorest 70% own 50% of the
wealth. Finally, the poorest 90% own
only 50% of the wealth, while in the
society represented by the green line,
the poorest 90% own 70% of the
wealth. Thus, in the society
represented by the purple line, the
richest 10% of the households own
half of all the nation's wealth. (Again,
keep in mind, that the wealth
distribution in the U.S. is more
unequal than the distribution shown
by the purple line.)
The Gini coefficient is a numerical measure of distributional
inequality. The idea behind the Gini coefficient is fairly
simple. We've labeled the area between the Lorenz curve
and the diagonal line area A and the remaining area under
the diagonal to the right of and below the Lorenz curve area
B. As wealth distribution becomes more unequal the Lorenz
curve bows out more and area A becomes larger and area B
becomes smaller.

The Gini coefficient is defined as:
The Gini coefficient can
take values between 0 and
1. If the Gini coefficient =
0, wealth is distributed
exactly equally. If the Gini
coefficient = 1, all wealth
is owned by a single
individual. Thus, larger Gini
coefficients mean greater
inequality.

% Household Share of Income
20 4.3
40 10.3
60 16.9
80 24.7
All household 43.9
INEQUALITY IN INCOME :

Contrasts of health care spending and achievement
Some countries achieve high life expectancy while spending little on
health care. Others spend heavily while achieving relatively low life
expectancy. In the graph, the most striking comparison is between the
US and Cuba. Cuba achieves virtually identical life expectancy to the US
while spending less than $200 per person on health care, compared to
$4,400 per person in the US.
END