The Gini Coefficient

The Gini coefficient is a statistical measure used to gage the degree of inequality in a given nation or population, it is a range from 0 → 1, with 0 depicting perfect equality and 1 signalling perfect inequality. More specifically, the gini is used in comparison of income equality or inequality. I find this measure of particular fascination due to its implications in comparative studies, and the variances which align with higher and lower levels of equality and human development. Developed in 1912 by a statistician of italian descent by the name of Corrado Gini, it takes into account the Lorenz curve: a relationship between the total income earned in an economy plotted against the distribution rate of said income. The Gini coefficient delves a level deeper to produce a ratio of equality. The graph below illustrates these relationships, with the yellow area showing the Gini Index.

via: http://www3.nccu.edu.tw/~jthuang/Gini.pdf

 

In explanation, a Gini index which is equal to 0 would show that every income earning individual in the given economy is obtaining the same amount of money in the same time frame, therefore showing perfect equality. Conversely, a coefficient equal to 1 would suggest that a single person earns every bit of the economy’s income, with complete control. An illustration of such situations could be an absolute communism of efficient allocation and equal disbursement, versus a totalitarian monarchy, or dictatorship in which all monies are delivered to a single individual. Clearly, these extremes have not been witnessed in such a pure, however, they illustrate the point. A point which then can be used as a frame set for comparative analysis.

 

The macroeconomic implications of the gini index give scope to the development and competitiveness of the country in question. The following chart shows the 2013 gini coefficients for a number of countries, with the best and worst performers highlighted. Notice, the United States is among the least income-equal nations in the world. Such macroeconomic phenomena are the basis for many political movements, such as the Occupy Wall St 99% movement of 2012, and the Bernie Sanders campaign platform of 2016. This data indicates that these outcries are not unfounded, nor unqualified.

Via: https://data.oecd.org/inequality/income-inequality.htm#indicator-chart

 

The upper echelon of income-equal nations include Iceland, Norway, Denmark, and other Nordic Nations, which also perform well in the scope of education and employment rates. These exceptional coexisting performances for education, employment and income equality can be said to have a clear correlation. Below is the same chart, except depicting the employment rates country by country, in which the aforementioned correlations are apparent.

Via: https://data.oecd.org/emp/employment-rate.htm

 

The gini index allows for a rabbit-hole approach to social issues, as it often kicks down the door into certain phenomena observed in a society, or can take an investigation into social variances between nations to a deeper realm of understanding. In coordination with other variables, one can discern a level of understanding for the social construct of a nation or economy of interest, and thereby pursue the shortcomings and successes of said demographic.  

The Gini Coefficient