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)
