Addressing income and wealth inequality
Introduced| English | Meaning |
|---|---|
| Lorenz curve/ˈlɒrənts kɜːv/ | A graph comparing the cumulative share of income or wealth with the cumulative share of the population, ordered from poorest to richest. |
| Gini coefficient/ˈdʒiːni ˌkəʊɪˈfɪʃənt/ | A numerical measure of inequality in a distribution, with zero representing complete equality. |
| inheritance/ɪnˈherɪtəns/ | The transfer of a deceased person's assets or rights to beneficiaries. |
| progressive taxes/prəˈɡresɪv ˈtæksɪz/ | Taxes for which the average tax rate rises as the taxable base, usually income, increases. |
| transfers/ˈtrænsfɜːz/ | transfers |
| redistribution/ˌriːˌdɪstrɪˈbjuːʃn/ | Changes to the distribution of income or wealth, commonly through taxes, transfers or public services. |
Measuring the gap between rich and poor
- Two countries can have the same average income yet feel utterly different — one shares it evenly, the other hoards it at the top.
- Economists measure that spread with the Lorenz curve 洛伦兹曲线 and the Gini coefficient 基尼系数.
Inequality policy route
Follow how policy can change disposable income and opportunity.
On a Lorenz diagram, greater inequality is shown by the curve:
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The line of equality is the 45° line; the more the Lorenz curve bows below it, the more unequal.
The Lorenz curve
- The Lorenz curve plots the cumulative share of income against the cumulative share of population.
- Perfect equality is the 45° line; the more the curve sags below it, the more unequal the distribution.
The further the Lorenz curve bows below the line of equality, the greater the inequality.
A Gini coefficient of 0 represents:
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Gini runs from 0 (perfect equality) to 1 (one person has all income).
The closer the Gini coefficient is to ______, the more equal the distribution.
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Gini = 0 is perfect equality; 1 is maximum inequality.
The Gini coefficient
- The Gini coefficient = the area between the line of equality and the Lorenz curve, as a fraction of the whole triangle.
- It runs from 0 (perfect equality) to 1 (one person has everything). Higher = more unequal.
A progressive tax takes a larger percentage of income from higher earners.
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Progressive taxation is a key tool for reducing income inequality.
Match each policy to how it reduces inequality.
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Taxes, transfers and human-capital spending all narrow the income gap.
Causes and policies
- Causes: differences in wages, wealth, inheritance 继承, education, and unemployment.
- Policies to reduce it: progressive taxes 累进税 (higher rates on higher incomes), benefits/transfers 转移支付, and spending on education and healthcare.
Equality vs efficiency trade-off. Heavy redistribution 再分配 can blunt incentives to work and invest. Governments weigh fairness against the efficiency cost.
You've got it
- the Lorenz curve shows income share vs population share; sag below the 45° line = inequality
- the Gini coefficient runs 0 (equal) to 1 (one person has all)
- reduce inequality with progressive tax, benefits, and education/health spending