Lorenz curve and Gini coefficient

Saying 'this country is unequal' is vague. Economists wanted a picture and a single number to make inequality comparable across places and times. The Lorenz curve is the picture; the Gini coefficient is the number. Together they answer: how lopsided is the way income (or wealth) is shared?

To draw a Lorenz curve, line everyone up from poorest to richest, then plot what share of total income is held by the poorest 10 percent, the poorest 20 percent, and so on up to 100 percent. If income were perfectly equal, the poorest 40 percent would hold exactly 40 percent of income and the plot would be a straight 45-degree line — the line of perfect equality. Real income is unequal, so the curve sags below that line: the bottom 40 percent might hold only, say, 15 percent. The more it sags, the more unequal the society. The Gini coefficient turns that sag into one number: it is the area between the equality line and the Lorenz curve, scaled to run from 0 to 1 (or 0 to 100). A Gini of 0 means perfect equality (everyone the same); a Gini of 1 means perfect inequality (one person has everything). Most countries sit roughly between 0.25 and 0.60.

These tools are the standard language of inequality: a Gini lets you say a country grew more unequal over time, or compare it to its neighbours, in one figure. But a single number hides a lot. Two very different distributions can share the same Gini, it is sensitive to whether you measure before or after taxes and benefits, and it says nothing about poverty levels or about who specifically is rich or poor. So a Gini is a useful summary, not the whole story — always ask what it was measured on.