Thursday, June 7, 2007

What causes Lorenz curve to shift?

What causes shift in the lorenz curve?

The Lorenz curve is a measure of inequality.
The Lorenz curve shows cumulative income against cumulative income groups.

Diagram lorenz curve

The further the Lorenz curve is from the 45 degree line, the greater the inequality.

If the government introduced policies to reduce inequality. Higher income tax on rich, benefits for the poor, the Lorenz curve would shift to the left and get closer to the line of equality.

If there was an increase in wages for the highly skilled but not low skilled workers the lorenz curve would shift to the right, showing an increase in inequality

Causes of Poverty in UK

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