Chapter 10. Lorenz Curve and Gini Coefficient Measure distribution of thing your interested in. E.g.   Share of largest firms in an oligopolistic industry,

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Presentation transcript:

Chapter 10

Lorenz Curve and Gini Coefficient Measure distribution of thing your interested in. E.g.   Share of largest firms in an oligopolistic industry, e.g share of top eight, sixteen etc   distribution of income in an economy – –Work with example of Distribution of Income Measure distribution of thing your interested in. E.g.   Share of largest firms in an oligopolistic industry, e.g share of top eight, sixteen etc   distribution of income in an economy – –Work with example of Distribution of Income

Lorenz curve O 100 O Line of complete equality Percentage share of national income (cumulative) Percentage of population

INEQUALITY AND POVERTY Distribution in the UK – –size distribution – –Looking at Quintile Groups:   Divide population into 5 equal groups (by number of people) Distribution in the UK – –size distribution – –Looking at Quintile Groups:   Divide population into 5 equal groups (by number of people)

Size distribution of UK income by quintile group of households: 1997/8 Bottom 20% Next 20% Middle 20% Next 20% Top 20% 15% 25% 51% 7% 2% Income before taxes and benefits

Size distribution of UK income by quintile group of households: 1997/8 Bottom 20% Next 20% Middle 20% Next 20% Top 20% 15% 25% 51% 7% 2% Bottom 20% Next 20% Middle 20% Next 20% Top 20% 11% 16% 22% 44% 7% Income before taxes and benefits Income after taxes and benefits

O 100 O Line of complete equality Lorenz curve Percentage share of national income (cumulative) Percentage of population Lorenz curve

INEQUALITY AND POVERTY Measuring the size distribution of income – –Lorenz curves – –Gini coefficients Measuring the size distribution of income – –Lorenz curves – –Gini coefficients

Lorenz curve and Gini coefficient O 100 O Line of complete equality Lorenz curve A B Percentage share of national income (cumulative) Percentage of population Gini coefficient = A / (A + B)

Inequality Higher and Gini Coefficient lower O 100 O Line of complete equality Percentage share of national income (cumulative) Percentage of population L1L1 L2L2

Uncertain, poor worse off, higher incomes more evenly spread. Gini Coefficient ? O 100 O Line of complete equality Percentage share of national income (cumulative) Percentage of population L1L1 L2L2