REPRESENTATION OF THE

MARKET MECHANISM OF
INCOME DISTRIBUTION
USING THE LORENZ CURVE.
GINI INDEX.

Marynich Maria EO-103

Scientific adviser - Ph.D., Assoc. Gladka Yu. A.
 PROBLEM OF INEQUALITY OF INCOME
DISTRIBUTION
It is the most common problem in the field of income distribution. The result
is a different level of quality of life. The causes of income inequality
include various:
• intellectual abilities;
• level of educational and professional
training;
• attitude to work;
• risk appetite;
• level of efficiency of economic
entities;
• market situation;
• unequal distribution of private
property and its inheritance; Fig. 1. Problem of inequality of income distribution
• discrimination, and others;
 THE GINI COEFFICIENT
The Gini coefficient is one of the statistical indexes (indexes of relative
inequality) of inequality of distribution of some quantity, which takes values ​
from 0 to 1. Most often used in measuring income inequality.

 0 – perfect quality;
 1 – total inequality.

Fig. 2. Gini coefficient of income distribution for different countries in the

world (according to 2018 data)
 THE LORENZ CURVE
 The Lorenz curve is a graphical representation of the cumulative distribution function. Is
an indicator of income inequality. From this graph we can deduce statistical indicators of
inequality (Gini index and Robin Hood index or Hoover index). Depending on indicators of
income’s quantity per some group of people, the Lorenz curve can be straight (line of perfect
equality), a line that merges with the abscissa (line of inequality), and a curve that transitions
from perfect equality to inequality (see Fig. 3).

Fig. 3. Types of interpretation of the Lorenz curve depending on the indicators.

 RELATIONSHIP BETWEEN THE LORENZ
CURVE AND THE GINI INDEX
 The Gini index formula represents us the
area of ​the figure multiplied by two,
which is bounded by the line of absolute
(perfect) equality and the Lorenz curve.

0≤G≤
1
 p (y) - actually distributed by income
Fig. 4. Lorenz curve and Gini index
(expenses);
 y - equal distribution of income (expenses).
 ALGEBRAIC METHOD OF
CALCULATION
For instance:
Share of the Cumulative share of
Share of income
population income
()
() ()
20%
20% 10%
10% 10%
10% 0,02
0,02 0,02
0,02
40%
40% 30%
30% 40%
40% 0,12
0,12 0,16
0,16
30%
30% 30%
30% 70%
70% 0,09
0,09 0,21
0,21
 - 10%
10% 30%
30% 100%
100% 0,03
0,03 0,1
0,1
the share of the i-th group in the
Together:
Together: 0,26
0,26 0,49
0,49
population;
- share of the i-th group in the
amount of income; We will have:
- cumulative share of the i-th group G = 1 – 2 *0,49 + 0,26 =
in the population; 0,28
GRAPHICAL METHOD OF 1)

CALCULATION
1. Finding the area of the ​figure bounded by
the Lorenz curve and the line of equality
(distribute the graph by vertical lines,
highlighting trapezoids and triangles). The G 
area of ​a triangle is always equal to 1.
2)

2. Finding the area of the figure that is under

the Lorenz curve. The area of ​a triangle is
always equal to 1.

G 
THANK YOU
FOR YOUR
ATTENTION!