FAO.org

This analytical tool illustrates how Lorenz Curves can be used to identify the best income distribution on social welfare grounds, within a set of alternative income distributions generated by different policy options.

After highlighting some drawbacks of using specific functional forms of the Social Welfare Function (SWF) to infer welfare judgments, the rationale for using Lorenz Curves to rank income distributions is provided in a step-by-step procedure and is illustrated with some simple numerical examples. This module also points out the limitations of Lorenz dominance and highlights how, in some circumstances, it is necessary to use Generalised Lorenz (GL) Curves. Generalised Lorenz curves as tools to rank income distributions are discussed in the EASYPol Module 002: Social Welfare Analysis of Income Distributions: Ranking Income Distributions with Generalised Lorenz Curves.Generalised Lorenz curves as tools to rank income distributions are discussed in the EASYPol Module 002: Social Welfare Analysis of Income Distributions: Ranking Income Distributions with Generalised Lorenz Curves.

Generalised Lorenz curves as tools to rank income distributions are discussed in the EASYPol Module 002: Social Welfare Analysis of Income Distributions: Ranking Income Distributions with Generalised Lorenz Curves.

For further information, see also:

• Charting Income Inequality. The Lorenz Curve. EASYPol Series 000
• Social Welfare Analysis of Income Distributions: Ranking Income Distributions with Generalised Lorenz Curves. EASYPol Series 002
• Social Welfare Analysis of Income Distributions: Ranking Income Distributions with Crossing Generalised Lorenz Curves. EASYPol Series 003

This paper is part of a FAO Policy series: EASYPol-Resources for policy making (in agriculture, rural development and food security). To find all EASYPol series' resources, go to the Policy Support and Governance website, Resources page and type "EASYPol" in the free text search.