Gini coefficient definition pdf

Gini coefficient is also known as the gini index is the statistical measure which is used in order to measure the distribution of the income among the population of the country i. A gini coefficient of 0 expresses perfect equality, where all. If a 0, it means the lorenz curve is actually the line of equality. The same diagram lorenz curve is used to show the relative inequality in the distribution of income at the world level. Moreover, a ten percent increase in everyones income will not impact the gini coefficient. The authors use a gini index to measure inequality in educational attainment. It is an important index and is often seen in the news. 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.

Pdf the gini index is a summary statistic that measures how equitably a. Gini index world bank estimate brazil world bank, development research group. Gini coefficient of inequality the most widely used single measure of inequality is the gini coefficient. The gini coefficient is a measure of inequality of incomes or sometimes wealth across individuals. The gini coefficient is a statistic which quantifies the amount of inequality that exists in a population. The gini index is one of the most commonly used indicators of income inequality, and its computation and interpretation require a thorough understanding of various quantitative literacy concepts. It is defined as a ratio with values between 0 and 1. Data and research on social and welfare issues including families and children, gender equality, gini coefficient, wellbeing, poverty reduction, human capital and inequality. We propose that the gini coefficient can be used to enhance. Mathematically, the gini coefficient is defined as a ratio of the areas on the lorenz curve diagram see figure 8. Gini coefficient definition, formula calculation with. Gini coefficient is a statistical measure of distribution that is used as a gauge of economic inequality.

Whereas the gini coefficient is a measure of relative poverty, and it is use to measure the distribution of wealth at the world level. In education, gini coefficient is used to estimate the level of inequality in education for the given population. Incomes are more equally distributed and fewer people are poor where social spending is high. This papera joint product of the office of the vice president and the economic policy and poverty reduction division, world bank instituteis an extension of the paper measuring educational inequality. This statistic shows the gini coefficient, an index for measuring income distribution, for u. The coefficient measures the dispersion of income 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 company. Examples of parametric distributions with such pdfs can be found in. Income distribution function, pdfx, gini coefficient. The gini coefficient can be interpreted as the percentage of inequality represented in the population with respect to the given resource. Gini coefficient is a measure of the income inequality in a country or between countries.

Gini coefficient definition 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. 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. The gini coefficient is a measure of inequality of a distribution. Complete lesson on the lorenz curve and gini coefficient.

A value of 0 represents absolute equality, a value of 100 absolute inequality. 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. In economics, the gini coefficient sometimes called the gini index or gini ratio, is a measure of. More simply, it tells us how evenly the variable is spread. A score of 0 on the gini coefficient represents complete equality, i.

Some poverty indices incorporate inequality in their definition. Education gini index from 1960 to 1990 vinod thomas, yan wang, and xibo fan, world bank, washington, dc. Alevel economics the lorenz curve and gini coefficient. Included in the slides is also a number of mcqs and 15 mark exam question from aqa alevel economics with a suggested plan, sample student responses and mark scheme. A comparative study of the gini coefficient estimators based on the. Lorenz curve coincides with the diagonal in figure 2 and 1 perfect inequality. Oct 22, 2019 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. Graphical representation of the gini index lorenz curve. The gini coefficient also known as the gini index or gini ratio is a measure of differences in income. In this context, it is important to understand what this coefficient or index is, how is it measured and what is indias current status, for the ias exam economy sections. Sep 09, 2018 the gini coefficient is a statistic which quantifies the amount of inequality that exists in a population. The distribution of income in an economy is represented by the lorenz curve and the degree of income inequality is measured through the gini coefficient one of the five major and common macroeconomic goals of a government is the equitable fair distribution of income.

Rongxing guo, in understanding the chinese economies, 20. It is based on the lorenz curve, a cumulative frequency curve that compares the distribution of a specific variable for example, income with the uniform distribution that represents equality. Hong kongs gini coefficient compared with other economies. The gini coefficient is a measure of inequality of incomes or sometimes wealth across individuals a score of 0 on the gini coefficient represents complete equality, i. The gini coefficient also always rises when income is transferred from a. Measuring education inequality gini coefficients of. Gini index world bank estimate world bank, development research group. The gini coefficient is used to measure inequality of a region. Alternatively, the gini coefficient can also be calculated as the half of the relative mean absolute difference. We also measure redis tribution by comparing the gini for pretax and transfer market income mi to that of dpi.

It was developed by the italian statistician corrado gini in 1912. The gini coefficient is a statistic which measures the ability of a scorecard or a characteristic to rank order risk. As compared to other countries in figure 1, we see that the u. The gini coefficient is a number between 0 and 1, with 0 representing perfect equality and 1 perfect inequality. The gini coefficient is used in a wide range of fields including psychology, economics, and agriculture.

Data are based on primary household survey data obtained from government statistical agencies and world bank country departments. It was developed by the italian statistician and sociologist corrado gini and published in his 1912 paper variability and mutability. Notes on how to compute gini coefficient suppose you are given data like this. The gini index or gini coefficient is a statistical measure of distribution developed by the italian statistician corrado gini in 1912. The gini coef ficient measures inequality on a scale from 0 to 1, with higher numbers representing greater inequality. The gini coefficient is usually a number between 0 and 1 or 0 to 100. The gini coefficient is the gini index expressed as a number 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.

In this case, the gini coefficient is 0 and it means there is perfect distribution of income everyone earns the same amount. A gini value of 0% means that the characteristic cannot distinguish good from bad cases, eg. Defining and measuring inequality overseas development institute. Pdf the gini index and measures of inequality researchgate. It is, however, recommended that more indepth studies are conducted to develop this concept further and to address some of the issues raised in this. Because 100% is equal to 100100 1, and the two axes in the lorenz curve goes from 0% to. Definition and measurement measures of income inequality are based on data on peoples household disposable income see definition and measurement in ge1 for more detail. The gini coefficient is usually defined mathematically based on the lorenz curve, which. Measuring education inequality gini coefficients of education english abstract. Gini ranges from 0 to 1, where 0 means perfect equality everyone has the same incomewealth and 1 means absolute inequality one person gets the whole incomewealth and the others get nothing. If income is perfectly equally distributed, then the value of the gini coefficient will be zero. The lowest 10% of earners make 2% of all wages the next 40% of earners make 18% of all wages the next 40% of earners make 30% of all wages the highest 10% of earners make 50% of all wages. Gini coefficient and lorenz curve pdf download, cambridge international as and alevel chemistry course book free download ae94280627 estimation of the gini coefficient for the lognormal distribution of income using the.

What is the gini coefficient and what is its formula. It is defined as a it is defined as a ratio with values between 0 and 1. Lorenz curve and ginicoefficientginiconcentration ratio. 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 an important tool for analyzing income or wealth distribution within a country or region, but it should not be mistaken for an absolute measurement of income or wealth. The gini coefficient was introduced in 1921 by italian statistician corrado gini as a measure of inequality. Toward this end, we next rephrase the definition of the gini index gf by.

A higher number indicates a greater degree of income inequality. Applying the gini coefficient to measure inequality of water use in the olifants river water management area, south africa james cullis and barbara van koppen introduction benefits of water use. Goods bads bad rate phone 80% 80% 15% no phone 20% 20% 15% a gini value of 100% means that a characteristicscorecard distinguishes. 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 higher the gini coefficient is, the more unequal is the distribution of the thing being distributed across the population in question. For more information and methodology, please see povcalnet. 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 85 countries 196090. Goods bads bad rate phone 80% 80% 15% no phone 20% 20% 15% a gini value of 100% means that a characteristic. 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. A score of 1 would represent complete inequality, i. Joseph gastwirth reza modarres efstathia bura the use of. The gini coefficient the gini coefficient is a statistic which measures the ability of a scorecard or a characteristic to rank order risk. The main indicator of income distribution used is the gini coefficient. There are several other ways to define gini coefficient apart from the geometric definition 4.

It was developed by the italian statistician corrado gini in 1912 definition. Higher the value of an index, more dispersed is the data. From the classical gini index of income inequality to a new zenga. Information and translations of gini coefficient in the most comprehensive dictionary definitions resource on the web. Gini coefficient and lorenz curve explained towards data. 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. 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. Oecd glossary of statistical terms gini index definition. 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. Inside inequality in the arab republic of egypt facts and perceptions across people, time, and space. Gini coefficient as a life table function demographic research.

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. Gini coefficients of both market and net inequality, we build on our earlier result that the income distribution itself matters for growth by examining the determinants of the disposable income shares after tax of the poor bottom 10 percent, the middleclass fifth decile, and the rich top 10. The gini coefficient is derived from the lorenz curve, which sorts the population from poorest to richest, and shows the cumulative proportion. Measure of the deviation of the distribution of income among individuals or households within a country from a perfectly equal distribution. Definition the gini coefficient is usually a number between 0 and 1 or 0 to 100. It discusses its characteristics and the link with another popular graphical tool of representing inequality, the lorenz curve. The econometrics of inequality and poverty chapter 4. 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.

The gini index is a complex inequality measure2 and, as with many inequality measures, it is a synthetic index. Abstract the authors use a gini index to measure inequality in educational attainment. The gini coefficient on market incomesometimes referred to as a pretax gini coefficientis calculated on income before taxes and transfers, and it measures inequality in income without considering the effect of taxes and social spending already in place in a country. The attractive definition of the gini index is as twice the area between the equality line and the. Lorenz curve of the standard income distribution and the equidistribution line, what. In figure 1, as op is the equidistribution line, orp is the area defined by the. Therefore, its characteristic is that of giving summary. A map showing gini coefficients by country for 2017. Mar 06, 2019 the gini coefficient or gini index measures the inequality among the values of a variable. Gini coefficient definition, principles and limitations.

The gini coefficient has the advantage of being invariant with respect to scale, so that larger areas or richer areas do not necessarily have larger or smaller gini coefficients. Gini coefficient simple english wikipedia, the free. The gini coefficient gini index or gini ratio is a statistical measure of economic inequality in a population. This measure is 0 in maximum equality and 1 in perfect inequality.

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