Welfare Economics
Inequality Measurement
Gini, Lorenz, Atkinson — quantifying income and wealth distribution
Inequality measurement quantifies how unevenly income or wealth is distributed. Major metrics. (1) Gini coefficient: 0 (perfect equality) to 1 (one person has everything). Most common. (2) Lorenz curve: graph of cumulative income share. (3) Atkinson index: includes inequality aversion. (4) Top 1% / Top 10% shares: focus on top. (5) Palma ratio: top 10% / bottom 40%. Different measures: different aspects. US Gini: ~0.40-0.48 (varies by measure). Wealth more unequal than income. Recent: rising inequality in many countries. Major topic in economics, policy.
- Gini coefficient0 (equal) to 1 (most unequal)
- US Gini~0.40-0.48 (income; varies by measure)
- Wealth Gini~0.85 (much more unequal)
- Lorenz curveCumulative income share visualization
- Recent trendRising in most developed countries
- Famous studyPiketty (2014) "Capital in the 21st Century"
Interactive visualization
Press play, or step through manually. The visualization is yours to drive — try it before reading on.
Watch the 60-second explainer
A condensed visual walkthrough — narrated, captioned, under a minute.
Why inequality measurement matters
- Public policy. Distributional analysis.
- Welfare economics. Comparing distributions.
- International comparisons. Country differences.
- Politics. Major issue.
- Economic analysis. Effect on growth, stability.
- Tax policy. Progressive taxation.
- Social policy. Targeting interventions.
Common misconceptions
- One measure tells all. Multiple needed.
- Income inequality = wealth inequality. Different.
- Same Gini = same distribution. Different distributions can have same Gini.
- Inequality always rising. Historical patterns vary.
- Inequality always bad. Some incentives effects.
- Gini = poverty. Different concepts.
Frequently asked questions
What's the Gini coefficient?
Most common inequality measure. 0 to 1. 0: perfect equality (everyone has same). 1: one person has everything; others have nothing. Real countries: 0.25-0.65. Calculated from Lorenz curve (area between curve and line of equality). Easy interpretation. Same value can come from different distributions. Imperfect but useful summary.
How is the Gini calculated?
Geometrically: area between Lorenz curve and 45° line of equality, divided by total area below the equality line. Mathematical: G = (1/2n²μ) Σ_i Σ_j |y_i - y_j|. Where y is income, μ is mean. Computed from income data. Sensitive to: middle-income changes more than extremes. Different sensitivity than other measures.
What's the Lorenz curve?
Visual representation. X-axis: cumulative population (0 to 100%). Y-axis: cumulative income share. Equality: 45° line. Reality: curve below line. Bigger gap: more inequality. Gini: based on this curve. Useful: shows distribution shape. Different distributions can have same Gini.
Why use multiple measures?
Different sensitivities. Gini: emphasizes middle. Top 1% share: emphasizes very rich. Palma ratio: top 10% / bottom 40%. Atkinson: includes how much we care about inequality. Each has merit. Different policy implications. Comprehensive analysis: multiple measures together.
What's the difference between income and wealth inequality?
Wealth: cumulative net worth. Income: yearly earnings. Wealth typically more unequal. Gini for income: 0.40s typically. Wealth Gini: 0.85+ typically. Why: top earners can save more; wealth compounds; inheritance. Wealth inequality: more persistent across generations. Both important; tell different stories.
What did Piketty contribute?
Thomas Piketty, "Capital in the 21st Century" (2014). Major book. Argument: when r > g (rate of return on capital exceeds growth rate), inequality rises mechanically. Historical: capital share has risen since 1980s. Wealth inequality projected to rise further. Solutions: progressive taxes, global wealth tax. Influential; highly debated.
What's the recent trend?
Rising inequality in most developed countries since 1980s. Top 1% income share US: ~10% (1970s) to ~22% (recent). Wealth concentration accelerating. Reasons. (1) Globalization. (2) Technology favoring skilled workers. (3) Tax cuts on capital. (4) Decline of unions. (5) Financialization. (6) Inheritance. Counter-trends in some Nordic countries. Active debate: causes, consequences, solutions.