Eco Analysis

Inequalities of
Development
Lorenz Curve and
Gini Coefficient
How evenly spread is the

worlds wealth?
Cumulative World Pop'
Cumulative Wealth (PPP)
1988
1993
10
0.9
0.8
20
2.3
50
9.6
8.5
75
25.9
22.3
85
41
37.1
90
53.1
49.2
95
69.8
66.3
99
91.7
91.5
100
100
100
World distribution of wealth (PPP) Lorenz Curve

100
Pop
90
80
70
60
50
ne
i
L
40
of
li
a
t
to
ra
g
e
nt
n
it o
1988
199
3
10
0.9
0.8
20
2.3
50
9.6
8.5
25.9
22.
3
41
37.
1
53.1
49.
2
69.8
66.
3
99
91.7
91.
5
100
100
100
75
85
30
90
20
95
10
10
20
30
40
50
60
70
Cumulative Global Population
80
90
100
Wealth
(PPP)

100
The richest 10%

possessed
46.9% of the
world wealth in
1988.
on
90
80
70
60
50
ne
i
L
40
of
li
a
t
to
Pop
i
t
ra
g
e
nt
1988
199
3
10
0.9
0.8
20
2.3
50
9.6
8.5
25.9
22.
3
41
37.
1
53.1
49.
2
69.8
66.
3
99
91.7
91.
5
100
100
100
75
85
30
90
20
95
10
10
20
30
40
50
60
70
80
90
100
Wealth
(PPP)

100
The richest 10%

possessed
50.8% of the
world wealth in
1993.
on
90
80
70
60
50
ne
i
L
40
of
li
a
t
to
Pop
i
t
ra
g
e
nt
1988
199
3
10
0.9
0.8
20
2.3
50
9.6
8.5
25.9
22.
3
41
37.
1
53.1
49.
2
69.8
66.
3
99
91.7
91.
5
100
100
100
75
85
30
90
20
95
10
10
20
30
40
50
60
70
80
90
100
Wealth
(PPP)

100
Pop
90
80
70
ra
g
e
nt
60
n
it o
li
a
ot The greater
t
of
this area the
ne
i
L
more unequal
the
distribution
50
40
30
1988
199
3
10
0.9
0.8
20
2.3
50
9.6
8.5
25.9
22.
3
41
37.
1
53.1
49.
2
69.8
66.
3
99
91.7
91.
5
100
100
100
75
85
90
20
95
10
10
20
30
40
50
60
70
80
90
100
Wealth
(PPP)
What is a Gini Coefficient?

The
Gini coefficient, invented by the Italian

statistitian Corado Gini, is a number between
zero and one that measures the degree of
inequality in the distribution of something.
The coefficient would register zero (0.0 =
minimum inequality) for a society in which
each member received exactly the same
amount.
A coefficient of one (1.0 = maximum
inequality) would mean one member got
everything and the rest got nothing.
Calculating the Gini Coefficient

100
Although the Lorenz

Curve is good visual
indicator of
distribution equality,
the Gini Coefficient
provides a clearer
quantatitive value.
90
80
70
60
50
ne
i
L
40
of
li
a
t
to
ra
g
e
nt
n
it o
A / B = Gini
Values should lie
between 0 (total
integration) to 1 (total
segregation).
30
20
10
10
20
30
40
50
60
70
80
90
Tasks
Plot Lorenz Curves for 1988 and 1993

data on graph paper. Answer
Calculate the Gini Coefficient for both.
What do these tell you about trends in
world distribution of wealth between
1988 and 1993? Answer
Economists estimate that the world's
Gini coefficient fell to 0.63 in 1998
from 0.66 in 1970. Plot a graph to
show fluctuations over time. Answer
Try and find the worlds latest Gini
coefficient figures. What does it show.
Pop
Wealth
(PPP)
1988
1993
10
0.9
0.8
20
2.3
50
9.6
8.5
75
25.9
22.3
85
41
37.1
90
53.1
49.2
95
69.8
66.3
99
91.7
91.5
100
100
100
What are typical Gini

Coefficients for countries around
the world?
In practice, coefficient values range from around 0.2 for

historically equalitarian countries like Bulgaria, Hungary,
the Slovak and Czech republics and Poland to over 0.6 for
Central and South American countries (such as Brazil)
where powerful elites dominate the economy.
The evolution of the Gini coefficient is particularly useful
as it reveals trends. It shows the evolution towards
greater equality in Cuba from 1953 to 1986 (0.55 to
0.22) and the growth of inequality in the USA in the last
three decades during which the Gini went from 0.35 in
the '70's to 0.40 now (and it is still rising!).
Most European countries and Canada rate around 0.30,
Japan and some Asian countries get around 0.35, some
reach 0.40 while most African countries exceed 0.45.
(see later slides for more details)
Source:http://berclo.net/inden.ht
A Fairer Future for the World?

Global
trends for the Gini coefficient of

wealth can be rather confusing and
distorted by the rapid growth of large
Tiger Economies like China.
The gap between the worldss rich
and poor has never been wider.
Malnutrition, AIDS, conflict and
illiteracy are a daily reality for
millions. MakePovertyHistory.ORG
What about Equality within

Countries?
Selected South and

Middles Americas
Selected African
Gini
Argentina
Bolivia
2002
Brazil
2001
Chile 2000
Colombia
Ecuador
1998
El
Salvador
Guatemala
Honduras
Panama
Developed
Countries
Gini
Gini
0.51
Botswana
0.58
Central
African
Rep.
0.63
0.61
Australia
Malaysia
0.49
0.26
Taiwan,
China
2000
0.24
0.33
Republic
of Korea
1998
0.32
Denmark
1997
0.27
Thailand
2002
0.4
0.31
0.28
Belgium
2000
0.59
0.51
Malawi
1997/1998
0.54
South
Africa
0.58
France
1994
0.54
Uganda
1991
0.59
Germany
0.5
Zambia
1998
0.53
Ireland 2
0.31
Zimbabwe
0.57
Italy 2000
0.31
Luxembou
rg
0.29
0.58
0.52
0.5
Gini
0.32
Lesotho
1995
0.63
Selected East
Asian
Canada
2000
Norway
Selected Fast
Growing
India
China
0.33
Recap Why are Lorenz curves

and Gini Coefficients useful
They
can be used to tell how equal wealth

is distributed within a country at one time.
They can show changes in distribution
over time.
They can show differences between
countries
They often reflect changing political
situations
E.g. USA and South Africa
Lorenz Curve of U.S. Income,

2001
Lowest fifth
3.5 %
3.5%
Second fifth
8.8
12.3
Third fifth
14.5
26.8
Fourth fifth
23.1
49.9
Highest fifth
40.1
100.0
Cumulative percentage of income
Income
Quintile
Percentage Cumulative
of Total Percentage of
Family
Total Family
Income
Income
100
80
60
I
B
40
20
H
A
F
0
20
40
60
80
100
Cumulative percentage of families
Lorenz Curve for the U.S.

1929, 1970, 2001
Cumulative percentage of
income
100%
80
60
40
Line of absolute
equality
1970
2001
1929
20
0
40
20
60
80 100%
Cumulative percentage of population
U.S. Income Distribution Over

Time
From
1929 to 1970, income inequality

in the U.S. decreased.
From 1970 to 2001, it increased.

Time
Up
to 1970, equality increased

because:
Welfare programs.
Unemployment insurance.
Social security.
Progressive taxation.
Improved macroeconomic performance
of the economy.

Time
Inequality
increased because:
Wage increases have not kept up with

price increases.
A movement away from progressive
taxation.
A reduction in government funding for
some social programs.
Cumulative percentage of income
U.S. Income Distribution

Compared to Other Countries
100
80
60
40
20
0
Sweden
Japan
United States
Brazil
20
40
60
80 100
Cumulative percentage of population
What can you say about the distribution of wealth in the USA from this
Socioeconomic Dimensions
of Income Inequality
Income
distribution can be shown

according to socioeconomic
characteristics:
Race.
Ethnicity.
Geographic region.
Gender.
Type of job.
Changes over time

Remember
if Gini coefficient increases

then the distribution has become less
equal.
The
table below shows changes in the

gini coefficient between race groups in
Southern Africa.
What does it show
A) about differences between groups
B) what has happened to levels of
income distribution in South Africa.
OK so what does it mean to

us
You have found out a way to show inequality

graphically and statistically.
It allows you to compare countries
It allows you to look for causes of inequality
In essays, it is important to be able to show
proof of inequality and the extent of it in the
first section.
Relevance to other work in

Higher level
Different
Theoretical views on
Development
Rostows modernist approach all
countries can follow a path to
development
Dependency theorists and World
Systems Approach the development
of under development.

Eco Analysis

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Inequalities of

How evenly spread is the

Cumulative Wealth (PPP)

World distribution of wealth (PPP) Lorenz Curve

Cumulative Wealth (PPP)

Cumulative Global Population

World distribution of wealth (PPP) Lorenz Curve

The richest 10%

Cumulative Wealth (PPP)

Cumulative Global Population

World distribution of wealth (PPP) Lorenz Curve

The richest 10%

Cumulative Wealth (PPP)

Cumulative Global Population

World distribution of wealth (PPP) Lorenz Curve

Cumulative Wealth (PPP)

Cumulative Global Population

What is a Gini Coefficient?

Gini coefficient, invented by the Italian

Calculating the Gini Coefficient

Although the Lorenz

Cumulative Wealth (PPP)

Cumulative Global Population

Plot Lorenz Curves for 1988 and 1993

What are typical Gini

In practice, coefficient values range from around 0.2 for

A Fairer Future for the World?

trends for the Gini coefficient of

What about Equality within

Selected South and

Recap Why are Lorenz curves

can be used to tell how equal wealth

Lorenz Curve of U.S. Income,

Cumulative percentage of income

Cumulative percentage of families

Lorenz Curve for the U.S.

U.S. Income Distribution Over

1929 to 1970, income inequality

U.S. Income Distribution Over

to 1970, equality increased

U.S. Income Distribution Over

Wage increases have not kept up with

Cumulative percentage of income

U.S. Income Distribution

distribution can be shown

Changes over time

if Gini coefficient increases

table below shows changes in the

OK so what does it mean to

You have found out a way to show inequality

Relevance to other work in

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