The gini coefficient, which ranges between 0 and 1, is equal to the area between the actual and equal distribution curves divided by the total area under the equal distribution curve. Jun 26, 2018 the gini coefficient is used to express the extent of inequality in a single figure. The gini coefficient also known as the gini index or gini ratio is a measure of statistical dispersion developed by the italian statistician and sociologist corrado gini and published in his 1912 paper variability and mutability italian. It converts the lorenz curve into a number between 0 and 1. Complete equality, in which every individual has the exact same. I will discuss the gini coefficient and relate it to the relative mean difference. And it has long been accepted that the gini coefficient is the workhorse measure of inequality. A gini coefficient of one 100 on the percentile scale expresses maximal inequality among values for example where only one person has all the income. The formula reveals why the gini index sometimes appears in calculus books in the. Using this final expression, if the gini coefficient for the world is 0.
Many economists argue that certain amounts of inequality are necessary and desirable but that excessive inequality leads to efficiency problems and social injustice. It is often used as a gauge of economic inequality, measuring income. Economists have devised several ways of making such comparisons with a single index number. Gini coefficient definition, principles and limitations. Gini coefficient are aggregate inequality measure and can vary anywhere from 0 perfect equality to 1 perfect inequality.
If income is totally equally distributed so that the lorenz curve follows the 450 line, the gini coefficient is zero. In particular, the gini index has been widely used by economists and sociologists to measure economic. The economist offers authoritative insight and opinion on international news, politics, business, finance, science, technology and the connections between them. Ultimately, the economics article should be kept here without a disambiguation page since economics is the most common application of the term gini coefficient. The gini coefficient is a commonlyused measure of income inequality that condenses the entire income distribution for a country. In economics, the gini coefficient sometimes called gini index, or gini ratio, is a measure of. Search inside this book for more research materials. P90p10 ratio kuzntes curve this week, the book of the week is the economics of inequality by thomas piketty. A gini coefficient of 1 or 100% expresses maximal inequality among values e. The same diagram lorenz curve is used to show the relative inequality in the distribution of income at the world level. In a way, this contradicts the famous kuznets curve 1955, according to which inequality increases in the initial phase of the development process and then decreases as economies become richer. A popular measure of inequality is the gini coefficient, which ranges from 0 perfect equality to 1 perfect inequality, but is typically in the range of 0. While a perfect scenario would be that of equality in income distribution, this is not normally the case in most of the areas around the world.
It was developed by the italian statistician corrado gini in 1912 definition. In recent years the united states has hovered around the. Why is this gini coefficient so much smaller than it was for wealth in figure 19. It discusses its characteristics and the link with another popular graphical tool of representing inequality, the lorenz curve. Economics gini index is a poor inequality measure graham sowter takes issue with a recent letter by tim worstall of the adam smith institute that cited data suggesting that income inequality has. Summary this tool addresses the most popular inequality index, the gini index. If the variable being measured cannot take negative values, the lorenz curve. The gini coefficient measures the inequality among values of a frequency distribution. Rongxing guo, in understanding the chinese economies, 20. From the classical gini index of income inequality to a new zenga. Mar 12, 2015 gini developed his coefficient in 1912, building on the work of american economist max lorenz, who published a hypothetical way to depict total equality a straight diagonal line on a graph in. The gini index measures the extent to which the distribution of income or, in some cases, consumption expenditure among individuals or households within an economy deviates from a perfectly equal distribution. The most common measure of income inequality is the gini coefficient.
While it simplifies com parisons, however, the gini is not easy to explain. Mathematically, the gini coefficient is defined as a ratio of the areas on the lorenz curve diagram see figure 8. Gini coefficient simple english wikipedia, the free. Gini coefficient definition, formula how to calculate. Lorenz in 1905 for representing inequality of the wealth distribution the curve is a graph showing the proportion of overall income or wealth assumed by the bottom x% of the people, although this is not rigorously true for a finite population see below. Definition of gini coefficient new word suggestion. The gini coefficient also known as the gini index or gini ratio is a measure of differences in income. Learn concepts in economics, evaluate theories, view videos, and follow analysis here to help you understand economics, and fully prepare for examinations. Gini coefficient the gini coefficient gini index or gini ratio is a statistical measure of economic inequality in a population. Coefficient definition of coefficient by merriamwebster. School quality, educational inequality and economic growth.
The gini coefficient measures the income distribution in one societycountry. In economics, the gini coefficient sometimes called the gini index or gini ratio, is a measure of statistical dispersion intended to. The gini coefficient, or gini index, is derived from the lorenz curve, and like the lorenz curve it measures the degree of economic equality across a given population, and simplifies this reality into a single number. The usual range of this coefficient lies between 0. This technique is simple and revealing, but not without awkwardness. South korea and russia are slightly more equal according to the gini coefficient, ranking at. It indicates there is huge incomewealth inequality. The gini coefficient on wealth is the most important number in deciding tax policy and it should be a goal for any government.
Using the lorenz curve, we can also generate a numerical representation of income equality called the gini coefficient. The formula for the gini coefficient can be calculated. In rural tanzania, average incomes increased substantially between 1983. One of the measures that is often used is the gini coefficient. The gini coefficient is a measure of inequality of a distribution. The gini coefficient is a commonlyused measure of income inequality that condenses the entire income distribution for a country the gini coefficient is a commonlyused measure of income inequality that condenses the entire income distribution for a country into a single number between 0 and 1. The gini index is one of the most accepted and established methods to measure income inequality. The gini coefficient is a number between 0 and 1, where 0 corresponds with perfect equality where everyone has the same income and 1 corresponds with perfect inequality where one person has all the incomeand everyone else has no income. There are many methods for measuring economic inequality, with the gini coefficient being a widely. Gini coefficient is widely used by economist to show the inequality in a population king, et.
The gini coefficient can vary from 0 perfect equality, also represented as 0% to 1 perfect inequality, also represented as 100%. As the gini index approaches 1, income inequality increases. The page below contains most of the key terms from an introductory economics course. A gini coefficient of zero expresses perfect equality where all values are the same for example, where everyone has an exactly equal income. Mathematically, the gini coefficient is defined as a ratio of the areas on the.
Our misleading measure of income and wealth inequality. Compute and explain the gini coefficient of inequality. Oecd glossary of statistical terms gini index definition. Abstract scientists have analysed different methods for numerical estimation of gini coefficients. Explain any differences between this gini coefficient and that for wealth. Pdf the gini index and measures of inequality researchgate. Defining and measuring inequality, mobility, and poverty. Outcomes that economists would define as efficientthose that cannot make. Coefficient definition is any of the factors of a product considered in relation to a specific factor. The gini coefficient is a number between 0 and 1, where 0 corresponds with perfect equality where everyone has the same income and 1 corresponds with perfect inequality where one person has all the income, and everyone else has zero income. The term typically refers to inequality among individuals and groups within a society, but can also refer to inequality among countries. If there is a perfectly equal distribution of income the whole area will be b, hence aa. Whereas the ginicoefficient is a measure of relative poverty, and it is use to measure the distribution of wealth at the world level. It can be measured by various methods, including the lorenz curve and the gini coefficient.
Extended version of the gini index with different weighting schemes are also discussed. Besides economic inequality between countries or states, there are important types of economic inequality between different groups of people. The gini coefficient is used to express the extent of inequality in a single figure. The coefficient varies between 0, which reflects complete equality and 1, which indicates complete inequality. If there is a high degree of inequality, then area a will be a bigger percentage of the total area.
But it is not generally recognized that the coefficient is normally defined in a way which biases the measure in a downward direction, making inequality seem less large than another version of the coefficient would suggest. The gini coefficient, or gini index, is derived from the lorenz curve, and like the lorenz curve, it measures the degree of economic equality across a given population and simplifies this reality into a single number. The gini index is a statistical measure of distribution often used as a gauge of. In case a is a very large area and b is a small area, the gini coefficient is large.
It was developed by the italian statistician corrado gini in 1912. Inequality global economics a fundamental issue facing the global economy is the widening poverty gap between the developed and less developed world, and the widening distribution of income within countries and geographical regions. In economics, the gini coefficient, sometimes called the gini index or gini ratio, is a measure of statistical dispersion intended to represent the income or wealth distribution of a nations residents, and is the most commonly used measurement of inequality. Information and translations of gini coefficient in the most comprehensive dictionary definitions resource on the web. Developed in 1912 by corado gini an italian statistician the gini coefficient is most prominently used as a measure of inequality of income or wealth distribution. So, a country with a low gini coefficient like denmark. Differences in national income equality around the world as measured by the national gini coefficient. Feb 03, 2014 an unequal nation will have a gini coefficient closer to 1 while an equal nation will have a coefficient closer to 0. To read a definition scroll your cursor over a term or click on the term.
The gini coefficient is a numerical statistic used to measure income inequality in a society. The gini coefficient is a commonlyused measure of income inequality that condenses the entire income distribution for a country into a single number between 0 and 1. Learn vocabulary, terms, and more with flashcards, games, and other study tools. The coefficient measures the dispersion of income or distribution of wealth among the members of a population. Defining and measuring inequality, mobility, and poverty defining and measuring poverty poverty is framed from a material possessions perspective, and is defined as lacking a certain amount to fulfill basic standards of living. The information in a lorenz curve may be summarized by the gini coefficient and the lorenz asymmetry coefficient. The gini coefficient or gini index came about when corrado gini and italian sociologist wrote the book. The lorenz curve cannot rise above the line of perfect equality. The gini coefficient is usually a number between 0 and 1 or 0 to 100. Differences in income between individuals or families, or between different groups, areas, or countries. We will first look at how the gini coefficient is calculated and compare it with other measures of inequality between the rich and poor, such as the 9010 ratio.
It can be derived by comparing areas on a lorenz curve, as follows. Methodology the data used in this study are obtained from the educational statistics year book from the period of 19862005. She teaches economics at harvard and serves as a subjectmatter expert for media outlets including reuters, bbc, and slate. How we define inequality blogal prosperity by the center. The gini index or gini coefficient is a statistical measure of distribution developed by the italian statistician corrado gini in 1912.
It is often used as a gauge of economic inequality, measuring income distribution or, less commonly, wealth distribution among a population. To understand this, we must first understand the economic relationship between the peoples level of. If a 0, the gini coefficient becomes 0, which means perfect equality, whereas if b 0, the gini coefficient becomes 1, which means com. It was developed by italian statistician and sociologist corrado gini in. Mar 24, 2020 the gini coefficient is a measure of inequality of a distribution. Now use the calculator to compute the gini coefficient for another measure for example, age, weight, commuting time to university, number of siblings, or grade in the last exam.
At the same time, the gini coefficient increased from about 27% to 33% on average. Gini coefficient measures the inequality of wealth distribution or income inequality in a particular area. Important types of economic measurements focus on wealth, income, and consumption. As inequality increases, so does area a, the gini coefficient rises. His idea was that you could make systems stronger than the individuals, if you just weeded out the threats to the collective and accepted fascism democratic socialism combined with crony capitalism. Public users are able to search the site and view the abstracts and keywords for each book and chapter without a subscription. Using lorenz curves, various numerical ntegration attempts have been made to identify accurate. Income inequality is the extent to which income is distributed in an uneven manner. The gini coefficient, gini index, or coefficient of concentration is a concept that comes up for example in economics, when looking at the distribution of incomes. Gini developed his coefficient in 1912, building on the work of american economist max lorenz, who published a hypothetical way to depict total equality a straight diagonal line on a graph. The coefficient measures the dispersion of income or.
The most commonly used measurement of economic inequality is the gini index or gini coefficient. Economic inequality or wealth and income differences comprises all disparities in the distribution of economic assets and income. The values of gini coefficient can vary from 0 to 100, where 0 means total equality of the income redistribution in one society and 100 means total inequality of the income. The gini coefficient is derived from the lorenz curve, which sorts the population from poorest to richest, and shows the cumulative proportion. In economics, the lorenz curve is a graphical representation of the distribution of income or of wealth. Gini coefficientthe gini coefficient is a measure of inequality in an economy the higher the value, the greater the inequality. To assess inequality, economists often use a measure called the gini coefficient, which is based on the differences between people in incomes, wealth, or some other measure. Gini coefficient, the most general method for measuring the. The most popular of these is the gini index or coefficient or ratio or number. Oct 22, 2019 the gini coefficient, or gini index, is derived from the lorenz curve, and like the lorenz curve it measures the degree of economic equality across a given population, and simplifies this reality into a single number. Piketty noticed its limitations, and in his recent book 2014 he. The gini coefficient gini index or gini ratio is a statistical measure of economic inequality in a population. Definition of the gini coefficient economics online. The decile dispersion ratio, defined as the expenditure or income of the richest.
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