Scribd
Upload
34 views2 pages

Gini Co Efficient

The Gini coefficient is a statistical measure of income inequality ranging from 0 (perfect equality) to 1 (perfect inequality), based on the Lorenz curve. It is calculated as the area between the Lorenz curve and the diagonal line, with lower values indicating more equitable income distribution. While useful, the Gini coefficient has limitations, such as sensitivity to extreme values and not capturing other forms of inequality.

Uploaded by

vismayassathyan
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
34 views2 pages

Gini Co Efficient

The Gini coefficient is a statistical measure of income inequality ranging from 0 (perfect equality) to 1 (perfect inequality), based on the Lorenz curve. It is calculated as the area between the Lorenz curve and the diagonal line, with lower values indicating more equitable income distribution. While useful, the Gini coefficient has limitations, such as sensitivity to extreme values and not capturing other forms of inequality.

Uploaded by

vismayassathyan
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
You are on page 1/ 2

The Gini Coefficient

What is the Gini Coefficient?


The Gini coefficient is a statistical measure of income inequality within a
population. It ranges from 0 to 1, where:
0: Represents perfect equality (everyone has the same income)
1: Represents perfect inequality (one person has all the income, everyone else
has none)
How does it work?
The Gini coefficient is based on the Lorenz curve. This curve plots the
cumulative percentage of the population against the cumulative percentage of
income.

Diagonal line: Represents perfect equality.


Curve below the diagonal: Indicates inequality. The further the curve is from
the diagonal, the greater the inequality.
Calculating the Gini Coefficient
The Gini coefficient is calculated as the area between the Lorenz curve and the
diagonal line, divided by the area under the diagonal line.
Interpreting the Gini Coefficient
Low Gini coefficient: Indicates a more equitable distribution of income.
High Gini coefficient: Indicates a more unequal distribution of income.
Example:
A Gini coefficient of 0.2 indicates a relatively equal distribution of income.
A Gini coefficient of 0.5 indicates a moderately unequal distribution of income.
A Gini coefficient of 0.8 indicates a highly unequal distribution of income.
Limitations of the Gini Coefficient
Sensitivity to extreme values: The Gini coefficient is sensitive to extreme
values, such as very high or very low incomes.
Doesn't capture the entire picture: While the Gini coefficient is a useful measure
of income inequality, it doesn't capture other aspects of inequality, such as
wealth inequality or social mobility.
In conclusion, the Gini coefficient is a valuable tool for understanding income
inequality. However, it's important to consider its limitations and use it in
conjunction with other measures to get a complete picture of inequality in a
society.

You might also like