ECON 208 Lecture Notes - Lecture 12: Progressive Tax, Proportional Tax, Economic Equilibrium

• School: McGill University
• Department: Economics
• Course: ECON 208
• Professor: Irakli Japaridze

Document Summary

In the 19th century, economists emphasized the functional distribution of income. Focusing on the sources of income lost usefulness because blurred distinction between workers" and. There are several ways to measure the level equity in the distribution of income in an economy. The most common method is to use the lorenz curve. The lorenz curve works by collecting data on the income of various households in the economy and then graphing this data according to the cumulative percentage of total income. The closer a country is to the perfect equality line to more equally wealth is distributed in the country. By using the information derived from the lorenz curve it is possible to develop the gini index. Gini index is derived from the difference between area between the line of equality and the lorenz curve for the country and the total area underneath the line of equality. The higher the gini coefficient, the more unequal the country.