The gini index is one of the most accepted and established methods to measure income inequality. The econometrics of inequality and poverty chapter 4. They present two methods direct and indirect for calculating an education gini index, and generate a quinquennial data set on education gini indexes for the over15population. The coefficient ranges from 0 meaning perfect equality to 1 meaning complete inequality. The gini index is a statistical measure of distribution often used as a gauge of.
Income inequality among individuals is measured here by five indicators. States, we find that by household, the gini coefficient is 0. Another is chinas gini coefficient calculated with cstpcd. This video introduces the gini coefficient, which is a way to summarize income inequality using a single number. 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. Whereas the ginicoefficient is a measure of relative poverty, and it is use to measure the distribution of wealth at the world. This paper stems from work done by the authors at the mathematics for social justice workshop held in june of 2007 at middlebury college.
Economics letters 15 1984 363368 363 northholland a note on the calculation and interpretation of the gini index robert i. The lorenz curve is a graphical representation of the proportionality of a distribution the. Gini coefficient simple english wikipedia, the free. The beginning of the 21st century, as does a 2015 book by bourguignon. This is a list of countries or dependencies by income inequality metrics, including gini coefficients. The gini coefficient subject give clear graphic illustrations of how to measure absolute equality given the linear and area pictures in gini coefficient and lorenz curve. Like the relative mean difference, there does not exist a sample statistic that is in general an unbiased estimator of the population gini coefficient. The gini coefficient gini 1912 is a popular measure of statistical dispersion, especially used for analyzing inequality or concentration. It converts the lorenz curve into a number between 0 and 1. This index is based on the gini coefficient, a measurement of statistical dispersion on a scale between 0 and 1, representing low to high specialization, respectively colwell, 2011.
In economics, the gini coefficient sometimes called the gini index or gini ratio, is a measure of. Using lorenz curve and gini coefficient to reflect the. Gini coefficient definition, principles and limitations. 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 coefficient is usually a number between 0 and 1 or 0 to 100. Gini coefficient vs economic growth linkedin slideshare. See, for example, the elegant and appealing interpretation of the gini index described on. A primer on a statistical methodology article pdf available in the journal of economic inequality 2. Supply demand and market equilibrium applications of. Table distribution of income or consumption in tables world development indicators the world bank 2014. We provide a description of the gini coefficient and some. Whereas the gini coefficient is a measure of relative poverty, and it is use to measure the distribution of wealth at the world level. The bigger it is, the more unequally income is distributed. High incomes concern the last decile, which means q0.
The gini coefficient a commonly used measure of inequality of wealth has reached 0. A gini coefficient of 1 means one person owns all of the wealth and a coefficient of 0 means perfect equality, with no countries getting near either extreme and most developed countries being at 0. Gini coefficient for monthly household disposable income not equivalised from report on the household budget survey hbs 2012, table 3, report on hbs 200607, table 3, and report on hbs 200102, table 4. Modeling income distribuions and lorenz curves, volume 5 of economic studies in equality.
The same diagram lorenz curve is used to show the relative inequality in the distribution of income at the world level. Even if the gini coefficient of income inequality is not a perfect. The gini coefficient is typically expressed as a number between 0 egalitarian and 1. It is often used as a gauge of economic inequality, measuring income. The lorenz curve lorenz 1905, though developed independently, can be regarded as a graphical representation of the degree of inequalityconcentration calculated by the gini coefficient g and can also be used for. If a 0, it means the lorenz curve is actually the line of equality. The formula reveals why the gini index sometimes appears in calculus books in the. For more information and a complete listing of videos and online articles by topic. For the purpose of this analysis, we define economic globalization as the in. 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 or gini coefficient is a statistical measure of distribution developed by the italian statistician corrado gini in 1912. An alternative approach is to define the gini coefficient as half of the relative mean.
Let us define a lorenz curve, the instrument lorenz proposed for visualizing the. The gini coefficient or index is a prominent measure of income inequality. The measure has been in use since its development by. In this case, the gini coefficient is 0 and it means there is perfect distribution of income everyone earns the same amount. Thus a gini index of 0 represents perfect equality, while an index of 100 implies perfect inequality. The gini coefficient can vary from 0 perfect equality, also represented as 0% to 1 perfect inequality, also represented as 100%. Slideshare uses cookies to improve functionality and performance, and to provide you with relevant advertising.
The land gini coefficient and its application for land use. Lorenz curves, the gini coefficient and parametric distributions. A numerical measure of the level of income inequality in a nation. Measures the ratio of the area between the line of equality the 45 degree line and a nations lorenz curve to the total area below the line of equality. The authors use a gini index to measure inequality in educational attainment. The article also mentions the growing use of the palma ratio as an. The gini coefficient gini index or gini ratio is a statistical measure of economic inequality in a population. Measuring education inequality gini coefficients of education english abstract. The gini coefficient can be written in many different forms. Introductory concepts scarcity, opportunity cost, comparative advantage, and economic models 02. A gini of one represents perfect inequality, where one household has all of the income. Gini coefficient is defined as the area between the line of equality, which depicts perfect income equality, and the lorenz curve, which represents the actual cumulative distribution of wealth.
Second, gini himself proposed the coefficient that now bears his name as a measure of the variability of any statistical distribution or probability distribution. 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 world bank is the main organisation that provides the gini index data. All countries color coded in green have gini index scores less than 40, while those in shades of red have gini index above 40. Understanding the gini coefficient the gini coefficient is a summary statistic that measures the dispersion of incomes on a scale of zero to one. The gini coefficient also known as the gini index or gini ratio is a measure of differences in income. The gini coefficient is based on the comparison of cumulative proportions of the population against cumulative proportions of income they receive, and it ranges between 0 in the case of perfect equality and 1 in the case of perfect inequality. Specifically, he based his coefficient on the average of the absolute differences between pairs of observations, and defined it to. For those unfamiliar with the gini coefficient, it is a measure of the inequality of incomewealth distribution. A note on the calculation and interpretation of the gini. The gini coefficient satisfies four important principles. When we consider the countries of the world as a population of 210, the gini coefficient is 0. The gini coefficient is used in a wide range of fields including psychology, economics, and agriculture.
Sticerd, london school of economics and political science. The gini coefficients main advantage is that it is a measure of inequality by means of a ratio analysis, rather than a variable unrepresentative of most of the population, such as per capita income or gross domestic product. They present two methods direct and indirect for calculating an education gini index, and generate a quinquennial data set on education gini indexes for the over15population in. Gini coefficient measures the inequality of wealth distribution or income inequality in a particular area. Abstract the authors use a gini index to measure inequality in educational attainment. A primer on a statistical methodology article pdf available in the journal of economic inequality 2 may 2014 with 234 reads how we measure reads. Confidence intervals for the population gini coefficient can be calculated using bootstrap techniques. In this paper we extend the focus from the gini coefficient to an array of measures of the.
The gini coefficient is a measure of inequality in an economy the higher the value, the greater the inequality. It can be derived by comparing areas on a lorenz curve, as follows. 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. Pdf the gini index and measures of inequality researchgate. Based on lewis dualsector model, this paper explores a new mathematical model to evaluate income inequality between urban and rural residents quantitatively. A lorenz curve plots the cumulative percentages of total income received against the cumulative number of recipients, starting with the. The index is based on the gini coefficient, a statistical dispersion measurement that ranks income distribution on a scale between 0 and 1. 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. Pdf the gini index is a summary statistic that measures how. In this free online course, learn the basics of economics through a range of topics such as inflation, economic activity, and economic growth. To benchmark and monitor income inequality and poverty across countries, the oecd relies on a dedicated statistical database. However, when the estimation principles used to obtain g. Remuneration remuneration is any type of compensation or payment that an individual or employee receives as payment for their services or the work that they do for an organization or.
If income is perfectly equally distributed, then the value of the gini coefficient will be zero. Piketty 2000 in his book on the history of high incomes in france makes an extensive use of quantiles to study the french income distribution and particularly its right tail concerning high incomes. Pdf the estimation of the lorenz curve and gini index. In education, gini coefficient is used to estimate the level of inequality in education for the given population. Measuring education inequality gini coefficients of. The major advantage of the gini coefficient is that it can quantify differences, and it is very intuitive because it is based on the lorenz curve. The gini coefficient and negative income by chaunan chen, tienwang tsaur and tongshieng rhai it has widely been agreed that by far the best single measure of income inequality is the gini coefficient of concentration morgan 1962.
Nearly all of those links refer to the gini coefficient as a measure in economics. Nevertheless, they proceed to present all results with the gini coefficient. As the gini index approaches 1, income inequality increases. Apr 25, 2017 the gini coefficient of the whole world ranges from 0. More simply, it tells us how evenly the variable is spread.
The lorenz curve lorenz 1905, though developed independently, can be regarded as a graphical representation of the degree of inequalityconcentration calculated by the gini coefficient g and can also be used for additional interpretations of it. It was developed by the italian statistician corrado gini in 1912. If income is as unequally distributed as possible that is, if a single hh receives all hh income in the country then the gini coefficient will be one. Gini coefficient a numerical measure of the level of income inequality in a nation. In particular they permit us to define an equal distribution, given that the. Piketty 2000 in his book on the history of high incomes in france makes an extensive use. A gini of zero reflects perfect equality, where every household has the same income. The gini index measures the area between the lorenz curve and a hypothetical line of absolute equality, expressed as a percentage of the maximum area under the line. Definition of the gini coefficient economics online. The gini coefficient, originally used for quantifying differences in income, was reintroduced as the lgc to analyze the rationality of land use structure. The average of gini index scores in this map is about 40.
Although the gini coefficient is a very popular measure in the analysis of income inequality, it hardly figures in. It was developed by the italian statistician and sociologist corrado gini and published in his 1912. Income inequality and limitations of the gini index. 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. Higher gini index for a nation means more income difference between its people. The map shows the gini index in % of income worldwide, according to latest published data by world bank in july 2014 individual data points may be more than 10 years old. It was developed by the italian statistician corrado gini in 1912 definition.
Oct 05, 2011 this video introduces the gini coefficient, which is a way to summarize income inequality using a single number. It leverages a scale of 0 to 1 to derive deviation from perfect income equality. The gini coefficient measures the extent to which the distribution of income or consumption expenditures among individuals or households within an economy deviates from a perfectly equal distribution. Ultimately, the economics article should be kept here without a disambiguation page since economics is the most common application of the term gini coefficient. Income distribution function, pdfx, gini coefficient. In a lorenz curve, a measure of the difference between a given distribution of some variable, like population or income, and a perfectly even distribution. Macroeconomic weekly news update september 2, 2017 september 8, 2017.
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