Lorenz curve is a graph that shows the extent of the existing society, industry, inequality of income and wealth.
In the late 19th century - early 20th century, income inequality has been the subject of research of many leading economists in Western Europe and America.The main problem of the study was to assess the effectiveness and fairness of the distribution of wealth and income prevailing in the market economy.In 1905, Max Lorenz, an American statistician, has developed its own method of estimating the distribution of income, which became known as "Lorenz curve".
The graph on the x-axis lay proportion of the population of the country as a percentage of the total, and the vertical axis - the share of revenue as a percentage of total revenue.The graph shows that society always there disparities in income.For example, the first 20% of the population receive only 5% yield, 30% of the population - 10% yield, 50% - 25% yield, and so forth.The Lorenz curve shows the share of income attributable to the different groups of the population, formed by the size of the income.
In that case, if in society there was an even distribution of income, then the curve would be a straight line (bisector of the angle between the x-axis and y-axis).This line is called the absolute equality.Absolute equality is possible only in theory.This line shows that any particular percentage of families receive the appropriate percentage of income.That is, if the 20%, 50%, 70% respectively of the population will get 20%, 50%, 70% of the total yield, then corresponding points are located on the bisector.And in that case, if all the income accounted for 1% of the population, then the graph is the position would be reflected vertical line - absolute inequality.Thus, the Lorenz curve allows you to compare the distribution of income between different groups of the population, or at different times.
Based on the graph shows the Gini coefficient.Thus, the Lorenz curve and the Gini coefficient are closely linked.
The Gini coefficient is a quantitative indicator of the degree of inequality of income distribution of different options.Factor was developed Corrado Gini, the Italian economist, demographer and statistician.
The less evenly distributed income, the Gini coefficient is close to unity.The unit corresponds to perfect inequality.Accordingly, more uniform distribution, the ratio will be closer to zero.Zero corresponds to absolute equality.Systems of transfer payments and progressive taxation are able to bring to the distribution line of absolute equality.As the experience of developed countries, over time, income inequality is reduced.
Another of frequently used indicators of income distribution is the decile coefficient.It shows the ratio between the average income of the highest paid ten percent of the population and income averaging ten per cent of the least privileged.
for the Russian transition economy of the nineties was characterized by a trend of increasing income inequality.In late 1991, the decile coefficient was 5.4, in 1995 it rose to 13.4, and in 1998 - to 13.5.The Gini coefficient increased to 0.376 in 1998 to 0.256 in 1991. Differentiation of incomes, usually accompanied by a difference of wages of workers in some industries and occupations.Interprofessional and sectoral differentiation of salary levels in the market economy shows a socially useful activity, is the benchmark of employment and training.
