A New Ordered Family of Lorenz Curves with an Application to Measuring Income Inequality and Poverty in Rural China a New Ordered Family of Lorenz Curves with an Application to Measuring Income Inequality and Poverty in Rural China

The most common data source on income distribution in China is grouped data. When income data is in grouped form, some acceptable Lorenz model is needed to approximate the underlying Lorenz curve. This paper presents a new family of Lorenz curves and shows that the main model of our proposed family of Lorenz curves outperforms other popular Lorenz curve models using data on US income distribution for 1990. We then proceed to apply the main model in our proposed family of Lorenz curves to income data for rural China over the period 1980 to 2006. We find that the income share of the rural population at the low end of the income scale has been shrinking, income inequality in rural China has increased over time and that income inequality has impeded attempts to reduce poverty. However, the welfare of the rural population is still improving in terms of the generalized Lorenz dominance criterion. JEL classification: D3; C5