Ray: "economic inequality is the fundamental disparity that permits one individual certain material choices, while denying another individual those.

Ray: "economic inequality is the fundamental disparity that permits one individual certain material choices, while denying another individual those same choices."

Ray: "economic inequality is a slippery concept and is intimately linked to concepts such as lifetimes, personal capabilities, and political freedoms."

Income share of each group

Cumulative income shareof each group

 Equal

Society

LessEqual

Society

Lorenz(Equal

Society)

Lorenz (Less Equal

Society)

Poorest 20% 20% 5% 20% 5%

Low-Mid 20% 20% 12.5% 40% 17.5%

Mid 20% 20% 20% 60% 37.5%

High-Mid 20% 20% 25% 80% 62.5%

Richest 20% 20% 37.5% 100% 100%

Quantile Distribution of Income

0

5

10

15

20

25

30

35

40

Poorest 20% Low-Mid 20% Mid 20% High-Mid 20% Richest 20%

Percentage of Population

Perc

enta

ge o

f Inc

ome

Equal Less Equal

Lorenz Curve

0

20

40

60

80

100

120

0% 20% 40% 60% 80% 100%

Cumulative Percentage of Population

Cum

ulat

ive P

erce

ntag

e of

Inco

me

Lorenz (Equal) Lorenz (Less Equal)

Lorenz Curve

0

20

40

60

80

100

120

0% 20% 40% 60% 80% 100%

Cumulative Percentage of Population

Cumu

lative

Perce

ntage

of In

come Lorenz (Equal)

Lorenz (Less Equal)

B

Gini Coefficient

A

Gini = A/B

If A = 0, then G = 0(Perfect Equality)

If A = B, then G = 1(Perfect Inequality)

B

Country Kuznets Ratio of Income Inequality Index

India 1.96

Sri Lanka 1.67

Puerto Rico 2.33

US 1.29

UK 1.25

Source: Kuznets (1955)