On a standard income distribution diagram, if the area between the line of perfect equality and a country's Lorenz curve becomes smaller over time, this indicates that the country's Gini coefficient is increasing.
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Gini Coefficient Formula using Areas A and B
Figure 2.4b: Gini Coefficients from Various Lorenz Curves
Imagine a standard diagram used to show income distribution, with cumulative population percentage on the horizontal axis and cumulative income percentage on the vertical axis. The diagram includes a straight diagonal line representing perfect income equality. Two countries, Country A and Country B, are plotted on this diagram. The curve representing Country A is positioned significantly farther away from the line of perfect equality than the curve for Country B. Based on this visual information, what is the most logical conclusion about the income inequality in these two countries?
Policy Impact on Income Distribution
On a standard income distribution diagram, if the area between the line of perfect equality and a country's Lorenz curve becomes smaller over time, this indicates that the country's Gini coefficient is increasing.
Calculating an Inequality Index from a Distribution Graph
The Relationship Between Lorenz Curve Geometry and Inequality Measurement