The gini index or gini coefficient is a statistical measure of distribution developed by the italian statistician corrado gini in 1912. The conventional formula for estimating the extended gini coefficient is a covariance formula provided by lerman and yitzhaki 1989. The gini coefficient gini 1912 is a popular measure of statistical dispersion, especially used for analyzing inequality or concentration. From wikibooks, open books for an open world economics and statistics conclusion it would be naive to claim that the above estimates are accurate.
This is a list of countries or dependencies by income inequality metrics, including gini coefficients. The standard definition of the lorenz curve is in term of two equations. Gini coefficient is widely used in fields as diverse as sociology, economics, health science, ecology, engineering and agriculture. It was developed by the italian statistician corrado gini in 1912 definition. The gini coefficient, originally used for quantifying differences in income, was reintroduced as the lgc to analyze the rationality of land use structure. I will discuss the gini coefficient and relate it to the relative mean difference. Third, while globalization may play a role in determining inequality levels. Jun 14, 2017 when i asked peter lambert, a professor at the university of oregon and the author of several books on the gini coefficient and income distribution, why the gini methodology is still relevant today, he listed the usual reasons, but one point surprised me. Hederman are that taxes and benefits from noncash programs that help the poor are not included. 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 the gini coefficient is a statistic which measures the ability of a scorecard or a characteristic to rank order risk. We also show how to estimate the conditional gini under standard parametric assumptions.
Any lorenz curve we find for a real population will be below this curve. What is the gini coefficient and what is its formula. The objective is to identify the determinants of inequality over the past two decades in rich countries or, more precisely, in 25 oecd countries. Gini coefficient definition, calculation and indias. But the fact that income data, unemployment data, as well as the estimates of the severity of recessions, all point in the same direction does. The gini coefficient is derived from the lorenz curve, which sorts the population from poorest to richest, and shows the cumulative proportion. Gini coefficients of education world bank documents. The trend over time in the two gini coefficients is similar. Pdf more than a century ago, corrado gini proposed his wellknown concentration index for measuring the degree of inequality in the distribution of. Modeling income distribuions and lorenz curves, volume 5 of economic. The gini index food and agriculture organization of the united.
The lowest 20% of the earners make 2% of all income. The chief economist of the country believes that there is huge income inequality. From wikibooks, open books for an open world economics. Published in 1912 by corrado gini, the gini coefficient is best known for uses in economic studies that measure income inequality within nations, and the underlying mechanics make it. Pupilteacher ratio, expenditures on teachers wage, books, and. In economics, the gini coefficient sometimes called the gini index or gini ratio, is a measure of. The gini coefficient is used in a wide range of fields including psychology, economics, and agriculture. The econometrics of inequality and poverty chapter 4. The gini index is a summary statistic that measures how equitably a resource is distributed in a population. The lorenz curve can be used to calculate the gini coefficient another measure of inequality. When there are n equal intervals on the xaxis, equation 6. We suggest an alternative estimator obtained by approximating the lorenz curve by a series of linear segments. A gini value of 0% means that the characteristic cannot distinguish good from bad cases, eg.
In this assignment, we study income inequality in the united. A score of 1 would represent complete inequality, i. Therefore, the gini coefficient, denoted in the equation above, can be approximately computed by the following. In the united states between 1979 and 2007, the gini coefficient for pretax income, according to a study by the congressional budget office pdf, rose from 48 to 59. The closer the lorenz curve is to the line of equality, the smaller area a is. Oct 12, 2017 imf says australia has one of the fastest rising income inequality rates this article is more than 2 years old economic bodys fiscal monitor shows australias 30year inequality growth is. Mathematically, the gini coefficient is defined as a ratio of the areas on the lorenz curve diagram see figure 8. The coefficient ranges between 0 and 1, where 0 represents complete equality and 1 represents complete inequality. 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. More simply, it tells us how evenly the variable is spread. If playback doesnt begin shortly, try restarting your device. Mar 06, 2018 income inequality is measured using the gini coefficient, which calculates the extent to which the income distribution in a country deviates from perfect equity.
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. It was developed by the italian statistician corrado gini in 1912. If a 0, it means the lorenz curve is actually the line of equality. 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 index, he said, allows people to care about each other, which is quite unusual in. Jun 19, 2017 the gini coefficient is used to measure inequality of a region. We provide a description of the gini coefficient and some. 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. If there is a high degree of inequality, then area a will be a bigger percentage of the total area. It was developed by the italian statistician and sociologist corrado gini and published in his 1912 paper variability and mutability. The gini coefficient is used to measure inequality of a region.
It discusses its characteristics and the link with another popular graphical tool of representing inequality, the lorenz curve. Income distribution function, pdfx, gini coefficient. While income inequality in third world countries has aggressively been. Relative to the lognormal distribution with a similar value of the gini coefficient, the singhmaddala distribution has a. In education, gini coefficient is used to estimate the level of inequality in education for the given population.
The land gini coefficient and its application for land use. The power of the gini index the formula pacific standard. 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. The gini coefficient is defined as a ratio of the areas on the lorenz curve diagram. This is because the lorenz curves can have different shapes and yet still yield the same gini coefficient. Consider the criteria that make a good measure of income inequality, namely.
With the exception of the 19751980 pair, we strongly reject the hypothesis that the gini coefficient is the same in two different years11. 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 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. In economics, the lorenz curve is a graphical representation of the distribution of income or of wealth.
Imf says australia has one of the fastest rising income inequality rates this article is more than 2 years old economic bodys fiscal monitor shows australias 30year inequality growth is. Measuring gini coefficient of education munich personal repec. 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. Piketty 2000 in his book on the history of high incomes in france makes an extensive use. Measuring education inequality gini coefficients of education english abstract. One of the measures that is often used is the gini coefficient. 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. Feb 24, 2010 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. From the classical gini index of income inequality to a new zenga.
Methodology the data used in this study are obtained from the educational statistics year book from the period of 19862005. School quality, educational inequality and economic growth. Gini coefficient simple english wikipedia, the free. Gini coefficient is widely used by economist to show the inequality in a population king, et.
Gini coefficient of inequality the most widely used single measure of inequality is the gini coefficient. 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. 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. Rongxing guo, in understanding the chinese economies, 20. Lorenz curves, the gini coefficient and parametric distributions. Also this textbook intends to practice data of labor force survey. In the basis of economic logic, education enhances social and political mobility. This paper stems from work done by the authors at the mathematics for social justice workshop held in june of 2007 at middlebury college. The coefficient ranges from 0 meaning perfect equality to 1 meaning complete inequality. Lorenz in 1905 for representing inequality of the wealth distribution.
For illuminating statistical and historical notes on the beta and other related distributions in the context of measuring economic inequality, we refer. Gini index frees preliminaries industry and academia gini index ratemaking homeowners data ordered lorenz curve and gini index ordered lorenz curve statistical inference gini interpretations concluding remarks the gini index the 45 degree line is known as the line of equality in welfare economics, this represents the situation where each. Measuring education inequality gini coefficients of. Calculating a standard error for the gini coefficient. The industry gini index is based on the gini coefficient, a commonlyused measure of inequality across a group. It is defined as a ratio with values between 0 and 1. Extended version of the gini index with different weighting schemes are also discussed. 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 lgc has a different connotation for each target and has many sublgcs, called basic land use gini coefficients, such as lgcamount, lgcspatial, and lgcmass. This is used to illustrate properties and uses of the conditional gini, and to compare it to related methods. We do however also present formula for the atkinson class of inequality measures, which are ordinally equivalent to the ge class, and the popular gini coefficient. A gini of one represents perfect inequality, where one household has all of the income. 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 and measures of inequality researchgate. In this case, the gini coefficient is 0 and it means there is perfect distribution of income everyone earns the same amount. This approach is the same as that in economics since age at. Goods bads bad rate phone 80% 80% 15% no phone 20% 20% 15% a gini value of 100% means that a characteristic. For example, in social sciences and economics, in addition to income gini coefficients, scholars have published education gini coefficients and opportunity gini coefficients. Supply demand and market equilibrium applications of supplydemand model. In particular, the gini index has been widely used by economists and sociologists to.
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. The direct method uses the following formula to calculate gini coefficient deaton 1997. Gini coefficient gini coefficient economic inequality. Imf says australia has one of the fastest rising income. 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. In rural tanzania, average incomes increased substantially between 1983. So if everyone in a country had the same income, the number would be 0, and if one person made all the money and everyone else made none, the number would be 1. The formula reveals why the gini index sometimes appears in calculus books in the. A gini of zero reflects perfect equality, where every household has the same income. Apr 25, 2017 the gini coefficient of the whole world ranges from 0. 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. The gini coefficient for 2010 using this adjustment fell slightly from 0. The gini index or gini coefficient measures the percentage that a real lorenz curve is below the ideal curve.
The authors use a gini index to measure inequality in educational attainment. The gini coefficient is usually a number between 0 and 1 or 0 to 100. As compared to other countries in figure 1, we see that the u. The gini coefficient is calculated as the ratio of the area that lies between the straight 45degree line and the lorenz curve marked area a in figure 1. The geometrical derivation of the gini index and an alternative formula.
Notes on how to compute gini coefficient suppose you are given data like this. In this paper, we question this singular focus on the gini coefficient and evaluate. Gini coefficient hl gross domestic product gdp gross national product gnp human development index hdi indirect taxation. I couldnt find a solution that works with both multiple imputed data and survey weighted data. We deduce the integration by part formula by simply rearranging the terms. Introductory concepts scarcity, opportunity cost, comparative advantage, and economic models 02.
In some cases, this equation can be applied to calculate the gini coefficient without direct reference to the lorenz. Inequality measures members of the generalised entropy class of measures have the general formula as follows. Ib economicsmacroeconomics wikibooks, open books for an. Examples of parametric distributions with such pdfs can be found in, e. In addition to a selfcontained presentation of the gini. The gini coefficient also known as the gini index or gini ratio is a measure of differences in income. The gini coefficient is a globally used measure of income inequality in countries the. Setups 3 and 4 have relatively low inequality with approximate gini coefficients ofg2 0. Insights from machine learning june 2016 abstract in the literature on inequality and economic development, the overwhelming focus is on the gini coefficient, a single statistic for the entire income distribution. Pdf the gini index is a summary statistic that measures how equitably a resource is distributed in a population. Example of gini coefficient formula with excel template in a country, there are huge skyscrapers along with humungous slums. So if everyone in a country had the same income, the number would be 0, and if one person made all the money and everyone else made. Serviceindustry jobs at the low end pay less now than in 1979, and highskilled jobs on the high end pay much moreceo compensation, in particular, has climbed into the. The bigger it is, the more unequally income is distributed.
Gini coefficient definition, formula how to calculate. 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. Summary this tool addresses the most popular inequality index, the gini index. Alvareto, a note on the relationship between top income shares and gini coefficients, economics letters 2011.