Gini Coefficient Formula (Based on Lorenz Curve Areas)

Figure 2.4b: Gini Coefficients from Various Lorenz Curves

Figure E2.1: Calculating the Gini Coefficient from a Lorenz Curve Diagram

Causal Link Between Lorenz Curve Area and Gini Coefficient

An economist is comparing income distribution in two countries. A graph shows a 45-degree line representing perfect equality. Country A's income distribution is represented by a curve that bows significantly away from this 45-degree line, creating a large area between the curve and the line. Country B's income distribution is represented by a curve that lies much closer to the 45-degree line, creating a very small area between its curve and the line. Based on this information, what can be concluded about the Gini coefficients of the two countries?

Analyzing Policy Impact on Income Inequality

If a new government policy causes the area between the 45-degree line of perfect equality and a country's Lorenz curve to become smaller, this indicates that the country's Gini coefficient has increased.

Calculating Inequality from a Distribution Graph

Evaluating Inequality with Crossing Distribution Curves

Figure 2.4a: The Lorenz Curve and Gini Coefficient for Wealth Ownership