Gini coefficient?

Question

Tell me about this concept, thanks a lot.



(with your words, i don't want the wikipedia and others)

Answer 1

The average income per head in two countries may be equal but the income distribution in one country A may be more skewed than in another country B. One would tend to consider the people in the latter country B to be better off because income disparities are lower in B. But how do we measure the income disparities with a single index? The Gini coefficient is relevant in this context as it is a measure of inequality of a distribution of income or wealth or anything else. It is defined as a ratio with values between 0 and 1. It measures the deviation of actual distribution of income / wealth from an egalitarian (perfectly equal) distribution. If income ( or wealth or something else) is distributed equally among all individuals in a population (ie., everyone has the same income/ wealth, the distribution is called the most egalitarian and the Gini coefficient is equal to zero (0). On the other hand, if only one individual captures all the income / wealth, we say that distribution is most unequal and this distribution deviates the most from an egalitarian distribution. In this case, therefore the Gini Coefficient is one (1).It was developed by the Italian statistician Corrado Gini in 1912 . As far as income distribution is concerned, poor countries (those with low per-capita GDP) have Gini coefficients that fall over the whole range from low (0.25) to high (0.71), while rich countries have generally intermediate Gini coefficient (under 0.40). Generally, the lowest Gini coefficients are found in the Scandinavian countries, as well as the recently ex-socialist countries of Eastern Europe. Gini coefficients for the United States has increased over the years -1970: 0.394,1980:0.403,1990: 0.428, 2000: 0.462 and 2005: 0.469. This has been due to lowering of taxes on income of the richer classes as also the growth of highly paid technology workers and professional executives as also the rise in income in the nature of capital gains in the stock market..
The Gini coefficient is a very powerful tool of analysis. It helps one to see if over the years the disparities in income distribution has increased or declined in any country. It also helps to judge whether one country has a better (less unequal) income/ wealth distribution than anothr country. But its validity depends directly on the quality of the statistical data used to calculate it. Unfortunately, there are no international norms in this matter. That means that the Gini coefficient can be manipulated to a certain extent by left wing analysts who could seek to decry extreme inequalities or by conservative right wingers who might wish to demonstrate that inequality is at a minimum. Care should therefore be taken to make sure of the objectivity of the source of each gini before drawing hasty conclusions. I suspect that communist countries in general manipulate the income distribution data. Besides, in these countries, the party functionaries who control the State/ Govt. enjoy lot of priveledges and perks that are counted as income.
Gini Index is nothing but Gini coeffecient multiplied by 100. Subject to the above limitations, one can see how different countries are placed in terms of Gini Index of Income inequality at http://en.wikipedia.org/wiki/List_of_countries_by_income_equality

Answer 2

It is a measure of income inequality based of the deviation of the income distribution from perfect equality. Gini=1 if one person has everything, and Gini=0 if everyone has the same amount. Countries have Gini indexes between about .25 to .75. The social welfare states in Europe have gini indexes around .3 and the some poverty stricken nation in the world have gini indexes as high as .7.
The concept is also sometime to measure wealth distribution, The gini indexes for wealth is significantly higher than it is for income in all countries.

Answer 3

relies upon on what your financial philosophy is. actually, very low could additionally propose communist/socialist economies. In maximum capitalist economies, the GINI index would be skewed (bigger) in the direction of the prosperous. The ALREADY prosperous get a miles better % of the nationwide income than the ALREADY no longer-prosperous. on the different severe, in case you have a GINI index on the brink of one million, each and all of the wealth is controlled by employing one or some persons. Fidel Castro's CUBA could be a good occasion - as could virtually any risky dictatorship.