Lorenz Curve


DEFINITION of 'Lorenz Curve'

A graphical representation of wealth distribution developed by American economist Max Lorenz in 1905. On the graph, a straight diagonal line represents perfect equality of wealth distribution; the Lorenz curve lies beneath it, showing the reality of wealth distribution. The difference between the straight line and the curved line is the amount of inequality of wealth distribution, a figure described by the Gini coefficient.

BREAKING DOWN 'Lorenz Curve'

The Lorenz curve can be used to show what percentage of a nation's residents possess what percentage of that nation's wealth. For example, it might show that the country's poorest 10% possess 2% of the country's wealth.

  1. Income Inequality

    The unequal distribution of household or individual income across ...
  2. Poverty Gap

    The average shortfall of the total population from the poverty ...
  3. National Savings Rate

    An estimate from the U.S. Commerce Department's Bureau of Economic ...
  4. Gini Index

    A measurement of the income distribution of a country's residents. ...
  5. Wealth

    A measure of the value of all of the assets of worth owned by ...
  6. Purchasing Power Parity - PPP

    An economic theory that estimates the amount of adjustment needed ...
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