Lorenz Curves Another common way to analyze personal income statistics
is to construct what is known as a Lorenz curve.1 Figure 5.1 shows how it is
done. The numbers of income recipients are plotted on the horizontal axis, not
in absolute terms but in cumulative percentages. For example, at point 20, we
have the lowest (poorest) 20% of the population; at point 60, we have the bot
tom 60%; and at the end of the axis, all 100% of the population has been ac
counted for. The vertical axis shows the share of total income received by each
percentage of population. It is also cumulative up to 100%, meaning that both
axes are the same length. The entire figure is enclosed in a square, and a diag
onal line is drawn from the lower left corner (the origin) of the square to the
upper right corner. At every point on that diagonal, the percentage of income
received is exactly equal to the percentage of income recipients—for example,
the point halfway along the length of the diagonal represents 50% of the in
come being distributed to exactly 50% of the population. At the three-quarters
point on the diagonal, 75% of the income would be distributed to 75% of the