What is the difference between Lorenz curve and Gini Coefficient?
The Gini coefficient is equal to the area below the line of perfect equality (0.5 by definition) minus the area below the Lorenz curve, divided by the area below the line of perfect equality. In other words, it is double the area between the Lorenz curve and the line of perfect equality.
What is Lorenz curve explain?
A Lorenz curve is a graphical representation of the distribution of income or wealth within a population. Lorenz curves graph percentiles of the population against cumulative income or wealth of people at or below that percentile.
What is the other name of Lorenz curve?
The Lorenz Curve (the actual distribution of income curve), a graphical distribution of wealth developed by Max Lorenzin 1906, shows the proportion of income earned by any given percentage of the population.
What is the application of Lorenz curve?
An Application Of Lorenz Curve In The Study Of Population Inequality. The Lorenz Curve is used in the description and comparison of the concentration of several income variables. In this paper we propose it’s utilization to analyze the concentration of the population over some land surfaces.
How do you find the Gini coefficient of a Lorenz curve?
The Gini coefficient can be calculated using the formula: Gini Coefficient = A / (A + B), where A is the area above the Lorenz Curve and B is the area below the Lorenz Curve.
What is the Lorenz curve Why is it important?
Lorenz curve is mostly used in representing economic inequality. However, it can also be used in representing inequalities in the distribution in any process or system. The level of unequal distribution increases when the Lorenz curve drifts away from the baseline.
How is a Lorenz curve constructed?
In a Lorenz-curve construct, both the horizontal and the vertical axis go from 0% to 100%. It follows that the diagonal of the box traced out by this graph – a 450 line – can serve as the benchmark for a perfectly equal distribution of the thing (e.g., income or health spending) in question.
What is the Gini coefficient geography?
The Gini coefficient is a measure of the degree of inequality in a society. It gives you a nice neat number to measure income inequality within a country. The Gini coefficient is just the Gini index divided by 100 (so between 0 and 1).
Who is the creator of the Lorenz curve?
The Lorenz curve is a graphical representation of income inequality or wealth inequality developed by American economist Max Lorenz in 1905.
What does a coefficient of 1 mean on the Lorenz curve?
A coefficient of 1 means that one person earns all of the income or holds all of the wealth. Accounting for negative wealth or income, the figure can theoretically be higher than 1; in that case, the Lorenz curve would dip below the horizontal axis.
How does the Lorenz curve show wealth inequality?
The Lorenz curve shows the cumulative wealth of each wealth decile. It shows that the lowest 38% of individuals have zero property wealth. The top 10% own nearly 50% of property wealth. With financial wealth, inequality is even greater with 60% of the population in debt and negative wealth.
What is the Gini coefficent of Brazil on the Lorenz curve?
The 99th percentile corresponds to 88.79% in cumulative income, meaning that the top 1% takes in 11.21% of Brazil’s income. To find the approximate Gini coefficent, subtract the area beneath the Lorenz curve (around 0.25) from the area beneath the line of perfect equality (0.5 by definition).