Data are based on primary household survey data obtained from government statistical agencies and world bank country departments. The chief economist of the country believes that there is huge income inequality. As compared to other countries in figure 1, we see that the u. Lorenz curve coincides with the diagonal in figure 2 and 1 perfect inequality. Measure of the deviation of the distribution of income among individuals or households within a country from a perfectly equal distribution. Feb 03, 2020 the index is based on the gini coefficient, a statistical dispersion measurement that ranks income distribution on a scale between 0 and 1. A numerical example of how to calculate the gini index 12. Mathematics, quantitative literacy, inequality, gini coefficient, calculus, social justice, inequity. Decision tree is one of the most popular machine learning algorithms used all along, this story i wanna talk about it so lets get started decision trees are used for both classification and. The gini index is a summary statistic that measures how equitably a resource is distributed in a population. It is a measure of the inequality of a distribution, a value of 0.
The measure has been in use since its development by. 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. Gini coefficient of zero expresses perfect equality, for example, when all the residents has the same income. The knowledge of how to carry out certain calculations is not su. 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. Two examples to calculate gini coefficient with formula2.
Gini coefficient measures the inequality of wealth distribution or income inequality in a particular area. The same diagram lorenz curve is used to show the relative inequality in the distribution of income at the world level. In the madeup example below inspired by carlos post i use the userwritten ineqdeco command to calculate gini coefficients for price in the auto dataset, separate for each combination of foreigndomestic and reputation1 to 5. The poorest 20% of the population now gain 9% of total income. Notes on how to compute gini coefficient suppose you are given data like this. For the examples shown in figure 1,the gini coefficients can be. Jun 17, 20 income inequality can be measured graphically by a lorenz curve or mathematically using the gini coefficient. Mar 06, 2019 the gini coefficient or gini index measures the inequality among the values of a variable. 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. The gini coefficient is a measure of inequality of a distribution. Gini index world bank estimate brazil world bank, development research group.
Extended version of the gini index with different weighting schemes are also discussed. 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. On the other hand, gini coefficient of 1 100% express maximall inequality among values, for example when one person has all the income. For example, five 20% quantiles low granularity will. It discusses its characteristics and the link with another popular graphical tool of representing inequality, the lorenz curve. Gini coefficient formula calculator examples with excel. 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. Examples of parametric distributions with such pdfs can be found in. Summary this tool addresses the most popular inequality index, the gini index. As with other inequality coefficients, the gini coefficient is influenced by the granularity of the measurements. The gini coefficient measures the inequality among values of a frequency distribution for example, levels of income. This is similar to calculating the gini coefficient for wage separately for each combination of team and year.
Data are displayed for geographies with at least 10,000 people based on 2017 population estimates. I have tried using the same formula as mentioned in the example but somehow i am not able to understand how this is working out. Therefore, the gini coefficient of the population is 0. Gini index world bank estimate world bank, development research group. Also check our tips on how to write a research paper, see the lists of research paper topics, and browse research paper examples. To build intuition, lets look at the lorenz curve and gini coefficient for a simple example.
The gini coefficient is a measure of statistical dispersion most prominently used as a measure of inequality of income distribution or inequality of wealth distribution. I will discuss the gini coefficient and relate it to the relative mean difference. This sample gini coefficient research paper is published for educational and informational purposes only. In education, gini coefficient is used to estimate the level of inequality in education for the given population. 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. It indicates there is huge incomewealth inequality. Based on the following information, calculate their gini. Let us take a simple example of a population of 20 people to understand the concept of the gini coefficient. Lorenz curve and ginicoefficientginiconcentration ratio.
The gini coefficient measures the inequality among values of a frequency distribution for example levels of income. This is a list of countries or dependencies by income inequality metrics, including gini coefficients. If a 0, it means the lorenz curve is actually the line of equality. For some countries trends for the dhi and pretax and transfer gini coefficients are very similar. The easiest intuitive interpretation of the gini coefficient invokes the lorenz curve, as we will explore below. This is a moderate decrease from 1988s estimated coefficient of 0. Quintil e adjusted gini coefficient calculation for. Example of gini coefficient formula with excel template in a country, there are huge skyscrapers along with humungous slums. If income is perfectly equally distributed, then the value of the gini coefficient will be zero. 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 interplay between industry and academia the best actuarial example.
For instance, around the time of the great recession, in 2008, scholars branko milanovic and christoph lakner surmise that the global gini coefficient for income was 0. The small sample variance properties of the gini coefficient are not known, and large sample approximations to the variance of the coefficient are poor mills and zandvakili, 1997. Poverty manual, all, jh revision of august 8, 2005. The index is based on the gini coefficient, a statistical dispersion measurement that ranks income distribution on a scale between 0 and 1. The richest 10% of the population used to gain 45% of total income but now only get 25% of total income. In this case, the gini coefficient is 0 and it means there is perfect distribution of income everyone earns the same amount. That is addressed in the mean difference article, which is a little more technically detailed and precise than the gini coefficient article. The geometrical derivation of the gini index and an alternative formula. We discuss a regressionbased method for estimating the conditional gini, and a method for inference using recent techniques for clustered data. Graphical representation of the gini index lorenz curve.
Quintil e adjusted gini coefficient calculation for premature. Whereas the ginicoefficient is a measure of relative poverty, and it is use to measure the distribution of wealth at the world level. The gini index or gini coefficient is a statistical measure of distribution developed by the italian statistician corrado gini in 1912. A gini coefficient of zero expresses perfect equality, where all values are the same for example, where everyone has the same income. A gini coefficient of zero expresses perfect equality where all values are. Perfect equalitythe absence of inequalityexists when and only when the inequality ratio. A gini value of 0% means that the characteristic cannot distinguish good from bad cases, eg. The gini coefficient is used in a wide range of fields including psychology, economics, and agriculture. The wealth share of the richest 1 percent in the u.
Martens p, brownell m, au w, macwiliam l, prior h, schultz j, guenette w, elliott. If income is as unequally distributed as possible that is, if a single hh receives all hh income in the country then the gini coefficient will be one. At an initial income of usd below which countries are classified according to the world bank as low income countries the predicted effect of a 1 percentage point increase in the gini coefficient on the longrun level of gdp per capita is around 4 percent. A popular measure of inequality is the gini coefficient, which ranges from 0 perfect equality to 1. Jul 06, 2010 gini index is equals to area a divided by area a and b 4. There are several estimates for the gini coefficient worldwide. Toward this end, we next rephrase the definition of the gini index gf by.
Apr 25, 2017 the gini coefficient of the whole world ranges from 0. 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 interplay between industry and academia the best actuarial example is the wellknown credibility theory. To construct the gini coefficient, graph the cumulative. The formula for the gini coefficient can be calculated. Gini coefficient of inequality the most widely used single measure of inequality is the gini coefficient. Example of the gini coefficient consider the following table. The conditional gini is estimated using a large, nationally representative household survey from thailand. It is defined as a ratio with values between 0 and 1. Estimation of the gini coefficient for the lognormal. A gini coefficient of 0 represents perfect income equality all households earning an equal share of income, while a coefficient of 1 represents perfect income inequality one household earning all of the income and the rest earning none. A value of 0 represents absolute equality, a value of 100 absolute inequality. Corrado gini himself was a fascist in mussolinis italy and an advocate for the nazis, so it is somewhat surprising that the coefficient bearing his name.
Assessing the gap between aggregate and detailed data 1. Income distribution is described by a twoparameter model for the lorenz curve. Alternatively, the gini coefficient can also be calculated as the half of the relative mean absolute difference. The econometrics of inequality and poverty chapter 4. In case a is a very large area and b is a small area, the gini coefficient is large.
While a perfect scenario would be that of equality in income distribution, this is not normally the case in most of the areas around the world. In this example, there has been a reduction in inequality the lorenz curve has moved closer to the line of equality. The gini coefficient is defined using the lorenz function. A gini coefficient of 0 expresses perfect equality, where all would have. Gini index of household income inequality regions of. In some cases, this equation can be applied to calculate the gini coefficient without direct. In this assignment, we study income inequality in the united states using the gini coefficient. Oct 29, 2019 this statistic shows the gini coefficient, an index for measuring income distribution, for u. Oecd glossary of statistical terms gini index definition.
A lorenz curve plots the cumulative percentages of total income received against the cumulative number of recipients, starting. In addition to a selfcontained presentation of the gini. Jul 28, 2016 also from table 1, the estimates of the gini index for lognormal distribution was found to be between 0. The gini index is the gini coefficient from the italian corrado gini expressed as a percentage, and is equal to the gini coefficient multiplied by 100. Gini can also be expressed in percentages gini coefficient. My own preference for measuring inequality either wealth or income is the gini coefficient. The gini index measures the extent to which the distribution of income or, in some cases, consumption expenditure among individuals or households within an economy deviates from a perfectly equal distribution. For example, the statement about being between 0 and 1 also depends on negative values not being allowed for the underlying measured values. Adjusted gini coefficient calculation for premature mortality using urban income quintile fiscal years. The gini coefficient and other standard inequality indices reduce to a common form.
Pdf the gini index and measures of inequality researchgate. Let us take the example of two countries country x and country y and check which country exhibits higher income inequality. This is the third part of the replica of mankiw, romer and weil 1992 paper on the empirics of economic growth. Goods bads bad rate phone 80% 80% 15% no phone 20% 20% 15% a gini value of 100% means that a characteristic. Like the relative mean difference, there does not exist a sample statistic that is in general an unbiased estimator of the population gini coefficient. Hence, a low gini coefficient means a high degree of decentralization. If you need help writing your assignment, please use our research paper writing service and buy a paper on any topic at affordable price. In this assignment, we study income inequality in the united. Gini coefficient definition, formula how to calculate. Gini coefficient as a life table function demographic research.
Census data focusing on wealth inequality rely on the gini coefficient. Confidence intervals for the population gini coefficient can be calculated using bootstrap techniques. The lowest 20% of the earners make 2% of all income. A low gini coefficient indicates more equal income or wealth distribution, while a high gini coefficient indicates more unequal distribution.
The united states, for example, saw the pretax and transfer gini coefficient increase 14% between the mid1980s and 2010, while its dhi gini coefficient increased 12%. Too often only the gini coefficient is quoted without describing the proportions of the quantiles used for measurement. The gini coefficient the gini coefficient is a statistic which measures the ability of a scorecard or a characteristic to rank order risk. From the classical gini index of income inequality to a new zenga. Rarely one sees the gini coefficient being motivated from an individual.
Pdf example of the gini coefficient dosa nazar academia. Higher the value of an index, more dispersed is the data. Calculus i introduction to the gini coefficient the gini coefficient or gini index is a commonlyused measure of inequality devised by italian economist corrado gini in 1912. The gini coefficient or gini index measures the inequality among the values of a variable. Gini ranges from 0 to 1, where 0 means perfect equality everyone has the same incomewealth and 1 means absolute inequality one person gets the whole incomewealth and the others get nothing. Gini index measures the extent to which the distribution of income or consumption expenditure among individuals or households within an economy deviates from a perfectly equal distribution. A solution was given by the ginicoefficient gc which is the area between the lorenz. A gini coefficient of one or 100% expresses maximal inequality among values e. How to calculate gini index for binary classification. Pdf the gini index is a summary statistic that measures how equitably a resource is distributed in a population.
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