Figure 14-10 The Lorenz Curve for Canadian Family Income, 2016
Another way to show the size distribution of income is found in Figure
14-10. The curves in the figure are Lorenz curves , showing how much
of total income goes to different proportions of the nations’ families. If
every family had the same income, 20 percent of total income would go to
20 percent of families, 40 percent of total income would go to 40 percent
of families, and so on. In this case, the Lorenz curve would lie exactly
along the diagonal and there would be no income inequality across these
groups. The farther the curve bends away from the diagonal, the more
income inequality exists.
The size of the area between the Lorenz curve and the diagonal is a
measure of the inequality of income distribution. If there were complete
income equality, the bottom 20 percent of income receivers would receive
20 percent of total income, and so forth, and the Lorenz curve would
coincide with the diagonal line. The lower Lorenz curve shows the
distribution of pre-tax income. The upper Lorenz curve shows the