Macro Foundations · intro
What moves on the Lorenz Curve & Gini Coefficient diagram
Income gains concentrated at the top lower every cumulative share below the top, bowing the Lorenz curve away from the line of equality and raising the Gini coefficient.
The dashed 45-degree line is perfect equality: the bottom half earns half. The purple curve is reality.
A tech boom pays huge premiums to a small group of workers and shareholders.
The Lorenz curve bows further from the equality line: the bottom 60% now hold a smaller slice of total income.
The gap between the two lines IS the Gini coefficient: more sag, more inequality.
Examiners ask this as: tech boom, rich get richer, inequality rises, top incomes, capital income.
Other scenarios on Lorenz Curve & Gini Coefficient