The Lorenz Curve is a graphical representation of income distribution in a population. It plots the cumulative percentage of income against the cumulative percentage of the population, with the poorest individuals on the left and the richest on the right.
A Lorenz Curve with a CI (Coefficient of Inequality) of 0.99 indicates a high level of income inequality in the population. This means that a small percentage of the population holds a large percentage of the total income.
A Lorenz Curve can be interpreted visually by looking at the shape of the curve. The closer the curve is to the diagonal line (representing perfect income equality), the more equal the income distribution. The farther the curve is from the diagonal line, the greater the level of income inequality.
A Lorenz Curve only provides a snapshot of income distribution at a specific point in time and does not take into account changes over time. It also does not consider factors such as non-monetary income, such as access to healthcare or education, which can impact overall quality of life.
The Lorenz Curve can be used to identify income inequality and inform policy-making decisions aimed at reducing this inequality. It can also be used to track changes in income distribution over time and evaluate the effectiveness of policies aimed at promoting income equality.