Gini index Flashcards
What is the GINI index
measures the inequality of wealth distribution it measures the area between the Lorenz curve and the line of absolute equality on graph paper just count squares score goes 0-100
A lower index indicates
More equal distribution with 100 perfect inequality
a higher index indicates
more unequal distribution with 100 being perfect inequality (one person has all income
WORLD BANK USES GINI TO COMPARE
DIFFERENCE BETWEEN GINI INDEX AND COEFFICENT
same thing but coefficient is from 0-1 just Gini index divide by 100
Advantages of GINI index
Can be used to indicate how the distribution of income has changed between countries over time
Can be used to compare different inequalities within country(rural/urban, ethnicities)
More representative than GDP per head or GDP
Disadvantage of Gini index
In some cases the coefficient can be the same for countries with different income distributions but equals of the income
Data is prone to sampling and data errors
Many countries don’t produce data
