Unit 2 Topic 2: Inequality

On this page:

Lorenz Curve and Gini Coefficient :: interactive model

How to use the interactive model and calculator:

press the "try a country" button at the bottom to view the Lorenz curve and Gini coefficient for a nation.
you can also access the database (created 2026) to see data for most nations, and then use the sliders to create a unique Lorenz curve for that nation and determine the Gini coefficient.

Why is this stuff important to know?

Read below the interactive for more information on the measurements used, and possible government policy responses.

Check out inequality data from all around the world :: click here to access the database

Lorenz Curve, Gini Coefficient and Palma Ratio

These three tools measure income inequality within an economy, providing governments and economists with evidence to evaluate distributional outcomes and design policy responses.

What they are:

The Lorenz Curve plots the cumulative share of income received against the cumulative share of the population, ranked from poorest to richest. A perfectly equal society produces a 45-degree diagonal line. The further the Lorenz Curve bows away from this line, the greater the inequality.
The Gini Coefficient quantifies this inequality by measuring the area between the Lorenz Curve and the line of perfect equality, expressed as a value between 0 (perfect equality) and 1 (perfect inequality). Higher values indicate greater income concentration among top earners.
The Palma Ratio compares the income share of the richest 10% against the poorest 40%, reflecting evidence that middle-income groups tend to receive a relatively stable share across countries, making top-to-bottom comparisons more meaningful.

Why measuring inequality matters: Persistent inequality reduces social mobility, undermines economic participation, increases poverty, and weakens social cohesion. High inequality correlates with poorer health outcomes, higher crime rates, and reduced intergenerational opportunity.

Policy responses:

Progressive taxation — higher income earners paying proportionally more
Transfer payments — welfare, pensions, and unemployment benefits redistributing income
Investment in public services — universal healthcare, education, and housing reducing effective inequality
Minimum wage legislation — lifting incomes at the bottom of the distribution

Real-world examples:

Scandinavian countries recording Gini coefficients below 0.30, reflecting strong redistribution
South Africa recording one of the world's highest Gini coefficients above 0.60
Australia's Gini sitting around 0.34, moderate by developed-nation standards
The Palma Ratio highlighting extreme concentration of income in nations like Brazil and Chile

Subject matter

Topic 2: Inequality

Describe key concepts using economic terminology, including absolute and relative poverty, egalitarian society, income, transfer payments, wealth, and the welfare state.
Describe a range of measures and indicators of inequality, e.g. the Lorenz curve, Gini coefficient, Henderson poverty lines, household income, mean and medium income, and equivalence scales.
Explain the causes of inequality of income and wealth in Australia (e.g. educational attainment, employment status, gender, age, occupation, ethnic background, uneven distribution of factors of production, and family structure) and other factors that impact particular groups in society, e.g. Australian Aboriginal peoples and Torres Strait Islander peoples, migrants, and people living with disabilities.
Select data and information from sources that offer evidence of the consequences of inequality in Australia and examine these sources to appreciate their underlying assumptions and perspectives.
Analyse and evaluate inequality issues, e.g.
- - the private and social costs and benefits of pursuing a redistribution of income and wealth,
  
  e.g. taxation, transfer payments, subsidisation of merit goods and other assistance
- - government strategies and/or interventions to address inequality and measures aimed at alleviating inequality and improving living standards, e.g. taxation, transfer payments, subsidising of merit goods and other assistance.
Create responses that communicate economic meaning using data, information, graphs and diagrams in paragraphs and extended responses to suit the intended purpose.