Economics » Poverty and Economic Inequality » Income Inequality: Measurement and Causes

Key Concepts and Summary

Key Concepts and Summary

Measuring inequality involves making comparisons across the entire distribution of income, not just the poor. One way of doing this is to divide the population into groups, like quintiles, and then calculate what share of income is received by each group. An alternative approach is to draw Lorenz curves, which compare the cumulative income actually received to a perfectly equal distribution of income. Income inequality in the United States increased substantially from the late 1970s and early 1980s into the 2000s. The two most common explanations cited by economists are changes in the structure of households that have led to more two-earner couples and single-parent families, and the effect of new information and communications technology on wages.

Glossary

Lorenz curve

a graph that compares the cumulative income actually received to a perfectly equal distribution of income; it shows the share of population on the horizontal axis and the cumulative percentage of total income received on the vertical axis

quintile

dividing a group into fifths, a method often used to look at distribution of income

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