Lorenz Curve: Distribution of Wealth in the United States

Construct an income distribution diagram using the Lorenz Curve for the U.S. with the latest data available. Describe the extent of inequality depicted in your diagram? Describe how you would reduce the inequality using vertical equity taxation? Using horizontal taxation?

Solution Preview

The Lorenz curve is attached. It is the same curve that has been attached in Solution: 505472. The same curve has to be used because the income data for U.S. remains the same.

The extent of inequality shown by the diagram is that the lowest 20% of the population gets only 3.3% of the income, the lowest 40% of the U.S. population gets only 11.8% of the income, the lower 60% of the U.S. population gets 26.4% of the income, the 80% of the U.S. population gets 49.8% of the U.S. income. The extent of income inequality is seen by the fact that the top 20% of the population gets 50.2% of income.

Vertical equity taxation can be used to reduce inequality because according to the vertical equity taxation, people with greater income should pay more taxes. In practice ...

Solution Summary

The answer to this problem explains the U.S. Lorenz Curve. The references related to the answer are also included.

Consider the following estimates from the 1990s of shares of income of each group. Draw a rough Lorenz curve for each country. Which has the most nearly equal distribution, based on your diagram.
Country Poorest 40% Next 30% Next 20% Richest 10%
Bolivia 13 21 26 40
Chile 13 20 26 41
Uruguay 22 26 26 26

Consider a 12-person stylized dual economy with the following income distribution:
(1,1,1,1,1,1,1,1,1,4,4,4,4)
1- Graph theLorenz curve.
2- Calculate The Gini coefficient
3-Now suppose the incomes of two members increase from 1to 4. Graph theLorenz curve (you may use your graph in part1, distinguish which curve applies h

Author's explanation of a Lorenzcurve: Economists use a cumulative distribution called a Lorenz curve to describe thedistribution of income between households in a given country. Typically, a Lorenz curve is defined on [0,1] with endpoints (0,0) and (1,1) and is continuous, increasing, and concave upward. The points on this cu

1- Do you think it might make a difference if individual citizens understood thedistribution and concentration of wealth, power, and influence in theUnitedStates? What difference would it make and why?
2- How has your view of the influence of wealth and power in theUnitedStates? How important to you is this change?

Assume that you have the following information about a country:
Percentile of population Income in Billions %share cumm value
Bottom 20% $300 5% 5%
2nd 20% 500

Please see the attached file for the fully formatted problems.
Show that for , the equilibrium (x*, y*, z*) = (0, 0, 0) is globally (nonlinearly) stable for theLorenz system. That is, any (x(t), y(t), z(t)) would eventually approach (0, 0, 0) as .
Consider the "volume"
(a) Show that, using theLorenz equations

Consider the following land distribution data for a developing country:
Holding size % Holdings % Holdings Area CUMUL
Less than 1 50 5 5
1-2 20 10 15
2-10 15 15

So, what is the Normal Distribution, and when you think you know what it is, post a real-example of one (other than height), then ask yourself is it really normally distributed? Can everything be normally distributed, that is, fall along a 'bell curve'?