The Lorenz curve graphs the distribution of income or wealth across a population.
It plots the cumulative share of total income or wealth received by the cumulative share of people, usually ranked from poorest to richest. A perfectly equal distribution would appear as a 45-degree line: the bottom 20 percent would receive 20 percent of income, the bottom 50 percent would receive 50 percent, and so on. The actual Lorenz curve usually lies below that line.
The larger the gap between the equality line and the Lorenz curve, the greater the measured inequality. The Gini coefficient can be calculated from this relationship, although the curve itself provides more visual detail about where inequality occurs across the distribution.
The curve is named after American economist Max O. Lorenz, who described it in 1905. A common mix-up is confusing it with the Phillips curve, which relates inflation and unemployment, or the Laffer curve, which links tax rates and tax revenue.