What is gini coefficient

Similar Posts: How Does the Gini Coefficient Work? The Gini coefficient can vary from 0 (perfect equality, also represented as 0%) to 1 (perfect inequality, also represented as 100%). A Gini coefficient of zero means that everyone has the same income, while a coefficient of 1 represents a single individual receiving all the income (of course, neither of these extremes are very likely). The higher the Gini index, the greater the degree of inequality; in the case of a very high Gini index, those with high incomes are taking in a disproportionately large percentage of total income. The Gini coefficient is equal to the area between the actual income distribution curve and the line of perfect income equality, scaled to a number between 0 and 100. The Gini coefficient is the Gini index expressed as a number between 0 and 1. How to Calculate The Gini Coefficient As previously mentioned, the Gini coefficient is derived from the Lorenz curve, which is a graph that also functions as a visual representation of the Gini index. To calculate the Gini coefficient: • From the area below the line of perfect equality (this number will automatically be 0.5), subtract the area below the Lorenz curve (see the graph below for a visual guide to what these lines look like) • Divide this number by the area below the line of perfect equality To put it another way, the Gini coefficient will be twice the area between the line of perfect equality and the Lorenz curve. Applying the Gini coefficient to ...

Frank Cowell, an economist at the London School of Economics and Political Science, says the Gini coefficient is like the Kardashians: "It's famous for being famous." He's speaking about one of the most commonly discussed measures of income and wealth inequality. The Gini coefficient has been in the news a lot since the U.S. Census Bureau released its An Atlantic Web site in October, for example, reports on a pairing of U.S. cities with foreign countries that have similar Gini coefficients. The city in the U.S. with the least income inequality, Ogden, Utah, was paired with Malawi in Africa, whereas the city with the greatest inequality, Bridgeport, Conn., was paired with Thailand in Southeast Asia. These pairings are a bit puzzling. Is it better to be Malawi than Thailand? Does it make sense to compare the Gini coefficient of one concentrated metropolitan area with that of an entire nation? A closer look at the data used to create the map shows that, as reported in a Forbeseditorial, the U.S. Census Bureau usually reports Gini coefficients based on pretax numbers, whereas many calculations for foreign countries use posttax numbers, which often include redistribution of wealth from rich to poor and tend to lower the Gini coefficient. Comparing the pretax number in one country with the posttax number in another is somewhat meaningless. To understand what the Gini coefficient can and cannot explain, and how to interpret articles about economic inequality, a deeper look at thi...

Once a Lorenz curve is constructed, calculating the Gini coefficient is pretty straightforward. The Gini coefficient is equal to A/(A+B), where A and B are as labeled in the diagram above. (Sometimes the Gini coefficient is represented as a percentage or an index, in which case it would be equal to (A/(A+B))x100%.) As stated in the Lorenz curve article, the straight line in the diagram represents perfect equality in a society, and Lorenz curves that are further away from that diagonal line represent higher levels of inequality. Therefore, larger Gini coefficients represent higher levels of inequality and smaller Gini coefficients represent lower levels of inequality (i.e. higher levels of equality). In order to mathematically calculate the areas of regions A and B, it is generally necessary to use calculus to calculate the areas below the Lorenz curve and between the Lorenz curve and the diagonal line. The Lorenz curve is a diagonal 45-degree line in societies that have perfect income equality. This is simply because, if everyone makes the same amount of money, the bottom 10 percent of people make 10 percent of the Therefore, the area labeled A in the previous diagram is equal to zero in perfectly equal societies. This implies that A/(A+B) is also equal to zero, so perfectly equal societies have Gini coefficients of zero. Maximum inequality in a society occurs when one person makes all of the money. In this situation, the Lorenz curve is at zero all the way out until the r...

In a "perfect" society, everyone would share wealth (or income) evenly. (Don't worry - this is an article about math, not communism!) The Gini Coefficient is one way to measure how evenly the income (or wealth) is distributed throughout a country. The Gini Coefficient is calculated as follows. We find out the income of all the people in a country and then express this information as a cumulative percentage of people against the cumulative share of income earned. This gives us a Lorenz Curve which typically looks something like the following. Image Credit: In plain English, the graph above indicates the proportion of the income going to the poorest people, middle-income people and richest people. There will always be rich and poor, but we are interested in how evenly wealth is distributed and most governments put effort into keeping this coefficient as low as possible. The Gini Coefficient ranges between 0 and 1 (or it can also be expressed as a number from 0 to 100) and is given by the ratio of the areas: If A = 0, it means the Lorenz Curve is actually the Line of Equality. In this case, the Gini Coefficient is 0 and it means there is "perfect" distribution of income (everyone earns the same amount). If A is a very large area (making B very small), then the Gini Coefficient is large (almost 1) and it means there is very uneven distribution of income. Countries with a high Gini Coefficient are more likely to become unstable, since there is a large mass of poor people who ar...

Written by Paul Boyce Posted in Last Updated April 12, 2023 Gini Coefficient Definition The Gini coefficient is a statistical measure used to calculate inequality within a nation. It does so by calculating the wealth distribution between members of the population. Through this calculation, we achieve a result between 0 and 1, which 0 representing perfect equality, and 1 absolute inequality. Originally thought of by Corrado Gini in 1912, it is most commonly used to measure income inequality. Both the World Bank and the UN produce annual statistics for the Gini coefficient, and many governments use it to track its inequality. For example, the UK’s Office for National Statistics (ONS) produces an annual report highlighting historical statistics of the Gini coefficient. The US’ Census Bureau department also releases a number of reports on the Gini Coefficient, keeping track of its movements. Key Points • The Gini Coefficient is a statistical measure that calculates inequality. • It measures inequality by measuring the distribution of income across the country. • Although the Gini coefficient measures wealth inequality, it doesn’t measure or factor in overall wealth. The Gini coefficient, also known as the Gini Index, is widely used across the world. It is one of the most efficient and easily understood figures on inequality, which makes it easier to compare countries. At the same time, it does have its drawbacks which we will look at later. How is the Gini Coefficient Calculat...

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What is inequality Inequality can be viewed from different perspectives, all of which are related. Most common metric is Income Inequality, which refers to the extent to which income is evenly distributed within a population. Related concepts are lifetime Inequality (inequality in incomes for an individual over his or her lifetime), Inequality of Wealth (distribution of wealth across households or individuals at a moment in time), and Inequality of Opportunity (impact on income of circumstances over which individuals have no control, such as family socioeconomic status, gender, or ethnic background). All of these inequality concepts are related and offer different yet complementary insights into the causes and consequences of inequality, hence providing better guidance to governments when designing specific policies aimed at addressing inequality. How is Income Inequality measured Gini coefficient is a typical measure of income inequality. The coefficient varies between 0 and 1, with 0 representing perfect equality and 1 perfect inequality. Most of the analysis is centered on the concept of income inequality as captured by the Gini coefficient, which is available for a large number of countries and relatively long periods. Unless specified otherwise, Gini income inequality refers to disposable income or consumption and thus already reflects any redistribution through taxes and transfers. Figure. Gini Coefficient of Inequality What Causes Inequality A range of global and do...