6.1. The Lorenz Curve and the Gini Coefficient

6.1.1. General Considerations

The Lorenz curve plots the cumulative percentage of the population number (horizontal axis) against the cumulative percentage of total income (vertical axis). Because both axes sum up to 100 percent, the Lorenz curve is represented in a square box that scales from 0 to 1. In the following example made of hypothetical numbers, income inequality is highlighted by reading the graph this way: 75 percent of the population earns less than 50 percent of the total income, and 50 percent of the population less than 25 percent of total income.

Figure 6.1. Lorenz Curve and Gini Coefficient

The Gini coefficient and its lack of a unit of measurement conveniently allows for temporal and spatial comparisons, as it is a relative measure of inequality; hence, the extensive use of the Gini coefficient. However, to depict a socio-economic phenomenon as complex as that of income inequality by a unique index is always restrictive. This is a limitation to bear in mind.