Sociology Index

GINI COEFFICIENT

Lorenz Curve

Gini coefficient was developed by Italian statistician Corrodo Gini to provide a mathematical expression of the degree of concentration of wealth or income. For measurements of income inequality at a given point in time, the most widely-used measure is the Gini coefficient.

Gini coefficent has been criticized over the years, but Gini coefficent continues to be used by social scientists describing inequality or comparing inequality among nations. Gini coefficient is superior for comparative analysis. But different researchers can and do obtain different values of the Gini coefficient for the same country.

In a completely equal society, the Gini coefficient is zero, no inequality, and in a society in which one person has all the income it is 100. So the higher the value, the more unequal the society. A Gini coefficent of approximately 0.400 is normal for most developed economies.

The economy and society are not physical systems which we can put on a pair of scales and measure exactly. The result is that different researchers can and do obtain different values of the Gini coefficient for the same country.

Singapore's Gini co-efficient, a measure of income inequality, hit 0.478 in 2012, according to government figures, higher than every other advanced economy aside from Hong Kong. Mindshare, a global media and marketing services firm, found in a survey last year that 72 percent of Singaporeans felt they "cannot afford to get sick due to high medical costs". Data published by the CPF shows the proportion of Singaporeans earning less than half the median income - an international yardstick for measuring the proportion of poor people -- rose to 26 percent in 2011 from 16 percent in 2002.

But however measured, its value in Britain and America is now higher than it was 20 years ago. Deininger and Squire reported for the World Bank in 1996 some 693 calculations of Gini coefficients since the war in different countries around the world. For most of the postwar period, the US Gini coefficient was in the low to mid-30s; it now seems to be in the low to mid-40s.

But the degree of inequality in the Anglo-Saxon societies must be placed in global context. Taking the world as a whole, the 1996 World Bank study found a minimum value of 18 and a maximum of 63, and offered the following generalisation: “Income inequality is much greater in Latin America and sub-Saharan Africa, which have Gini coefficients in the upper 40s, than in east and south Asia, which have Gini coefficients in the middle-to-upper 30s. The OECD countries, in general, have relatively egalitarian distributions of income, with Gini coefficients around 30, while the eastern European countries have historically had very low Gini coefficients.” 

The recent experience of inequality in countries such as South Korea and China mirror the evolution of global inequality over the past two centuries. In the 1950s, Korea was a poor but very egalitarian society. During its phase of phenomenal growth, inequalities opened up and its Gini coefficient approached 40. Now that Korean income is close to the average income levels of the west, prosperity is being more widely shared, and the Gini has dropped back to the low 30s.

A Lorenz Curve and a Gini Coefficent are ways of measuring the degree of income inequality in a society.

Lorenz curve provides a fuller grasp of how the Gini coefficient is determined.

M. O. Lorenz (1876-c1970), US statistician developed Lorenz curve.