Scribd
Upload
208 views3 pages

Gini Coefficient & Lorenz Curve: Assignment On

The document discusses the Gini coefficient and Lorenz curve. The Gini coefficient was developed by Italian statistician Corrado Gini in 1912 to measure income inequality in a society on a scale of 0 to 1. It compares the actual income distribution to a hypothetical equal distribution. The Lorenz curve is a graphical representation developed by Max Lorenz in 1905 to depict inequality, with the area between the curve and diagonal line of equality corresponding to the Gini coefficient. The document provides Gini coefficient values for Bangladesh, the USA, and Denmark.

Uploaded by

0612001
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
208 views3 pages

Gini Coefficient & Lorenz Curve: Assignment On

The document discusses the Gini coefficient and Lorenz curve. The Gini coefficient was developed by Italian statistician Corrado Gini in 1912 to measure income inequality in a society on a scale of 0 to 1. It compares the actual income distribution to a hypothetical equal distribution. The Lorenz curve is a graphical representation developed by Max Lorenz in 1905 to depict inequality, with the area between the curve and diagonal line of equality corresponding to the Gini coefficient. The document provides Gini coefficient values for Bangladesh, the USA, and Denmark.

Uploaded by

0612001
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/ 3

Assignment on

GINI COEFFICIENT & LORENZ CURVE

Prepared for:
Professor Dr. Muhammad Ziaulhaq Mamun
Course Instructor: Managing Operations

Prepared by:
Khondokar Abu Saleheen
MBA, 53D
Roll: ZR-14

Institute of Business Administration


University of Dhaka

April 25, 2016

Gini Coefficient:
Italian statistician Corrado Gini invented the Gini Coefficient. The United Nations (UN) uses
this coefficient in their annual ranking of nations.
According to Antonio Cabrales, a professor of economics at University College London,
The Gini coefficient provides an index to measure inequality.
It is a way of comparing how distribution of income in a society compares with a similar
society in which everyone earned exactly the same amount. Inequality on the Gini scale is
measured between 0, where everybody is equal, and 1, where all the country's income is
earned by a single person.
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 1905. The difference between this hypothetical line and the actual line produced
of people's incomes is the Gini ratio.
"The Gini has been around for a very long time, and it's very technically sound if you want to
measure income inequality across the whole population," explains Andy Sumner, director of
the International Development Institute at Kings College, London. "But one might say the
Gini is oversensitive to changes in the middle, and under sensitive at the extremes."
The coefficient doesn't capture very explicitly changes in the top 10% - which has become
the focus of much inequality research in the past 10 years - or the bottom 40%, where most
poverty lies. As a result, Sumner and colleague Alex Cobham put forward an alternative - the
Palma ratio - which does.(1)
Lorenz Curve:
The Lorenz curve is the graphical representation of wealth distribution developed by
American economist Max Lorenz in 1905. On the graph, a straight diagonal line represents
perfect equality of wealth distribution; the Lorenz curve lies beneath it, showing the reality of
wealth distribution. The difference between the straight line and the curved line is the amount
of inequality of wealth distribution, a figure described by the Gini coefficient.
Lorenz Curve for Bangladesh (2010)
120
100
80
60
40
20
0

20

40

60

80

100

120

Figure: Lorenz Curve for Bangladesh (2010)


Gini Coefficient for Bangladesh, USA, and Denmark:
Table: Gini Coefficient for Bangladesh, USA, and Denmark.
Country
Bangladesh (2010)(2)
USA (2015)(3)
Sweden (2013)(4)

Gini Coefficient
Urban
0.452

Rural
0.431
0.8056
0.249

Total
0.458

Reference:
1. Monitor, BBC Magazine. Who, What, Why: What is the Gini coefficient? [Online] 2015. [Cited:
April 24, 2016.] http://www.bbc.com/news/blogs-magazine-monitor-31847943.
2. Report of the Household Income & Expenditure Survey. Statistics, Bangladesh Bureau of. 2010,
p. 30.
3. Sherman, Erik. America is the richest, and most unequal, country. fortune.com. [Online]
September 30, 2015. [Cited: April 24, 2016.] fortune.com/2015/09/30/america-wealth-inequality/.
4. AFP. Denmark has OECD's lowest inequality. thelocal.dk. [Online] May 21, 2015. [Cited: April 24,
2016.] http://www.thelocal.dk/20150521/denmark-has-lowest-inequality-among-oecd-nations.

You might also like