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Lorenz Curve and the Measurement of Low, Middle and High Strata of Incomes

Author

Listed:
  • Tzvetan Ignatov
  • Tatyana S. Madjarova
  • Luben T. Toshkov

Abstract

The authors suggest a new method to determinate the limits of the three basic income groups. The Lorenz curve is split of three parts. The middle part corresponds to the middle stratum of incomes. The projections of this part on both axes are equal segments. The empirical Lorenz curve is transformed in new one with the same Gini coefficient. The transformed curve is composed by three segments with “clearly expressed the three strata of incomes”. The proposed model is used with some statistical data for the incomes and the wealth of the households in Bulgaria and Germany. The calculations are made with iterative methods in Microsoft Excel.

Suggested Citation

  • Tzvetan Ignatov & Tatyana S. Madjarova & Luben T. Toshkov, 2010. "Lorenz Curve and the Measurement of Low, Middle and High Strata of Incomes," Economic Studies journal, Bulgarian Academy of Sciences - Economic Research Institute, issue 3, pages 95-102.
    • Handle: RePEc:bas:econst:y:2010:i:3:p:95-102
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    References listed on IDEAS

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    1. Stefan Bach & Giacomo Corneo & Viktor Steiner, 2009. "From Bottom To Top: The Entire Income Distribution In Germany, 1992–2003," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 55(2), pages 303-330, June.
    2. Dorfman, Robert, 1979. "A Formula for the Gini Coefficient," The Review of Economics and Statistics, MIT Press, vol. 61(1), pages 146-149, February.
    3. Markus M. Grabka & Joachim R. Frick, 2008. "Schrumpfende Mittelschicht: Anzeichen einer dauerhaften Polarisierung der verfügbaren Einkommen?," DIW Wochenbericht, DIW Berlin, German Institute for Economic Research, vol. 75(10), pages 101-108.
    4. Hagerbaumer, James B, 1977. "The Gini Concentration Ratio and the Minor Concentration Ratio: A Two-Parameter Index of Inequality," The Review of Economics and Statistics, MIT Press, vol. 59(3), pages 377-379, August.
    5. Fellman, J, 1976. "The Effect of Transformations on Lorenz Curves," Econometrica, Econometric Society, vol. 44(4), pages 823-824, July.
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    More about this item

    JEL classification:

    • O15 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration
    • C46 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Specific Distributions
    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation

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