[85] The value and distribution of the incomes from informal or underground economy is difficult to quantify, making true income Gini coefficients estimates difficult. Typically, we presuppose a positive mean or total, precluding a Gini coefficient below zero. The Simpson index is in the range [0, 1], where 0 means maximum and 1 means minimum diversity (or heterogeneity). Since diversity indices typically increase with increasing heterogeneity, the Simpson index is often transformed into inverse Simpson, or using the complement Can a Family Survive on the US Minimum Wage? It is related to the accuracy ratio in population assessment models. ( Another example case,[26] in which 1% of the world's population owns 50% of all wealth, would result in a wealth Gini coefficient of at least 49%. [54], More detailed data from similar sources plots a continuous decline since 1988. As another example, in a population where the lowest 50% of individuals have no income, and the other 50% have equal income, the Gini coefficient is 0.5; whereas for another population where the lowest 75% of people have 25% of income and the top 25% have 75% of the income, the Gini index is also 0.5. Because of this, factors such as age distribution within a population and mobility within income classes can create the appearance of inequality when none exist, taking into account demographic effects. The more nearly equal a country's income distribution, the lower its Gini index, e.g., a Scandinavian country with an index of 25. Countries ranked by GINI index (World Bank estimate) - IndexMundi ) Gini income inequality index, 2020 - Country rankings: The average for 2020 based on 50 countries was 34.97 index points.The highest value was in Colombia: 53.5 index points and the lowest value was in Slovenia: 24 index points. Getting to a feasible income equality | PLOS ONE Map: U.S. Ranks Near Bottom on Income Inequality 88). For example, five 20% quantiles (low granularity) will usually yield a lower Gini coefficient than twenty 5% quantiles (high granularity) for the same distribution. Using the same method, the United States is claimed to have a Gini index of 36, while South Africa had the highest income Gini index score of 67.8. Correlation between Gini co-efficients and GDP per capita in three time periods. In the absence of household income surveys and income taxes, scholars have relied on proxy variables. Some countries distribute benefits that are difficult to value. \sigma Measuring Inequality: Forget Gini, Go With the Palma Ratio Instead, The Long, Weird History of Universal Basic Incomeand Why Its Back, Top 25 Developed and Developing Countries, Calculating Volatility: A Simplified Approach. Many of these low-wage workers live paycheck-to-paycheck and have no sick days, pension, or health insurance. Income inequality in the U.S. is the highest of all the G7 nations, according to data from the Organization for Economic Cooperation and Development. | In other words, it is double the area between the Lorenz curve and the line of perfect equality. Economists believe COVID-19 triggered an annual 1.2- to 1.9-percentage-point increase in the Gini co-efficient for 2020 and 2021. j The metrics accuracy is dependent on reliable GDP and income data. [97] In education, it has been used as a measure of the inequality of universities. The Gini coefficient incorporates the detailed shares data into a single statistic, which summarizes the dispersion of income across the entire income distribution. Wherever possible, consumption has been used rather than income. , in the calculation section above, may be used for the final model and at the individual model factor level to quantify the discriminatory power of individual factors. (Note that this formula can be applied when there are negative values if the integration is taken from minus infinity to plus infinity. Gini inequality index by country, around the world - TheGlobalEconomy.com Top 10 Countries with the Highest Gini Coefficients (%) - World Bank: South Africa - 2014 - 63.0 Namibia - 2015 - 59.1 Suriname - 1999 - 57.9 y Adam Hayes, Ph.D., CFA, is a financial writer with 15+ years Wall Street experience as a derivatives trader. Informal economic activity tends to represent a larger portion of true economic production in developing countries and at the lower end of the income distribution within countries. Gini Coefficient by Country 2023 - World Population Review Poverty Trap: Definition, Causes, and Proposed Solutions, Conflict Theory Definition, Founder, and Examples, America's Middle Class Is Losing Ground Financially, Social Justice Meaning and Main Principles Explained, Welfare Economics Explained: Theory, Assumptions, and Criticism, Egalitarianism: Definition, Ideas, and Types, Equity-Efficiency Tradeoff: Definition, Causes, and Examples, The Economic Message Behind Martin Luther King Jr.'s 'Dream' Speech, Income Inequality Definition: Examples and How It's Measured, Gross Domestic Product (GDP): Formula and How to Use It, GDP Per Capita Defined: Applications and Highest Per Country, Consumer Price Index (CPI) Explained: What It Is and How It's Used, Pareto Efficiency Examples and Production Possibility Frontier, Organisation for Economic Co-operation and Development (OECD), The Origins of the Gini Index: Extracts from Variabilit e Mutabilit (1912) by Corrado Gini, OECD Income (IDD) and Wealth (WDD) Distribution Databases, Poverty and Shared Prosperity 2020: Reversals of Fortune, Gini Index CoefficientDistribution of Family Income, How Was Life? The Giniindex is often represented graphically through the Lorenz curve, as depicted below, which shows income (or wealth) distribution by plotting the population percentile by income on the horizontal axis and cumulative income on the vertical axis. Statistical Concept and Methodology: The Gini index measures the area between the Lorenz curve and a hypothetical line of absolute equality, expressed as a percentage of the maximum area under the line. The Gini coefficient can then be thought of as the ratio of the area that lies between the line of equality and the Lorenz curve (marked A in the diagram) over the total area under the line of equality (marked A and B in the diagram); i.e., G = A/(A + B). The resulting informal income predominates as a livelihood activity for those in the lowest income brackets. Because of data and other limitations, the Gini index may overstate income inequality and can obscure important information about income distribution. [59] It is used to discern trends in social development through educational attainment over time. For example, in ecology, the Gini coefficient has been used as a measure of biodiversity, where the cumulative proportion of species is plotted against the cumulative proportion of individuals. = ) This compensation may impact how and where listings appear. Cookies collect information about your preferences and your devices and are used to make the site work as you expect it to, to understand how you interact with the site, and to show advertisements that are targeted to your interests. X_{i} World Bank's Poverty and Shared Prosperity 2020 report, Gini Index coefficient distribution of family income - CIA World Factbook. 6 facts about economic inequality in the U.S. Over recent decades, Hong Kong has witnessed increasing numbers of small households, elderly households, and elderly living alone. GINI index (World Bank estimate) - Country Ranking. Wealth Inequality by Country 2023 - World Population Review x The COVID-19 pandemic has exacerbated many existing inequalities. [92][93][28], In certain fields such as ecology, inverse Simpson's index Asia {\bar {x}} Shorrocks index is calculated in several different ways, a common approach being from the ratio of income Gini coefficients between short-term and long-term for the same region or country. South Africa ranks as the country with the lowest level of income equality in the world, thanks to a Gini coefficient of 63.0 when last measured in 2014. There were rises in inequality in some of the world most populous countries, including China, India, the US and . An alternative approach is to define the Gini coefficient as half of the relative mean absolute difference, which is equivalent to the definition based on the Lorenz curve. x_{j} A Besides his extensive derivative trading expertise, Adam is an expert in economics and behavioral finance. Middle East \mu The United States has a Gini co-efficient of 41.1, which is a high reading for such a developed economy. The United States has a Gini coefficient of 41.1. The Gini coefficient on disposable incomesometimes referred to as the after-tax Gini coefficientis calculated on income after taxes and transfers. Crow, E. L., & Shimizu, K. The World Population Review attributes this massive inequality to racial, gender, and geographic discrimination, with white males and urban workers in South Africa earning much better salaries than everyone else. Thus a Gini index of 0 represents perfect equality, while an index of 100 implies perfect inequality. Countries with an aging population, or those with an increased birth rate, experience an increasing pre-tax Gini coefficient even if real income distribution for working adults remains constant. Though India's education Gini Index has been falling from 1960 through 1990, most of the population still has not received any education, while 10 percent of the population received more than 40% of the total educational hours in the nation. And individuals differ in age and consumption needs. i 1 In everyday terms, this would be similar to describing the contents of a photo solely by its length along one edge, or the simple average brightness value of the pixels. Glossary y World Population Review. Although both Gini coefficients are defined as areas between certain curves and share certain properties, there is no simple direct relationship between the Gini coefficient of statistical dispersion and the Gini coefficient of a classifier. 2: The evolution of the Gini index, the T 10 /B 10 ratio, and inequality index (I) for two countries that have the same Gini index but differ in the T 10 /B 10 ratios (the World Bank database . [98] In chemistry it has been used to express the selectivity of protein kinase inhibitors against a panel of kinases. Forced Retirement: What it is, How it Works, FAQ, Predatory Lending: How to Avoid, Examples and Protections, Unbanked: What it Means, Statistics, Solutions, Underinsurance: What it is, How it Works, FAQ, The History of Unions in the United States, What Is Middle Class Income? In the special case of just two people, where one has no income, and the other has all the income, the Gini coefficient is 0.5. [14][15][16], The Gini coefficient was developed by the Italian statistician Corrado Gini and published in his 1912 paper Variabilit e mutabilit (Italian: variability and mutability). is the fraction of the population with income or wealth | 2 In that case, the Gini coefficient can be approximated using various techniques for interpolating the missing values of the Lorenz curve. The Dirac delta distribution represents the case where everyone has the same wealth (or income); it implies no variations between incomes.[30]. It is related to the AUC (Area Under the ROC Curve) measure of performance given by Iceland Cricket on Twitter: "As the most gender equal country in the Inequality on the Gini scale is measured between 0, where everybody is equal, and 1, where all the country's income is earned by a single person. With an area of 10,714 square miles, Haiti is among the most densely populous nations in the Caribbean region, and it is among the world's poorest nations. = Because the Gini attempts to distill a two-dimensional area (the gap between the Lorenz curve and the equality line) down to a single number, it obscures information about the shape of inequality. {\displaystyle \textstyle \mu =\int _{-\infty }^{\infty }xp(x)\,dx} He currently researches and teaches economic sociology and the social studies of finance at the Hebrew University in Jerusalem. [40] Economist Tomson Ogwang made the process more efficient by setting up a "trick regression model" in which respective income variables in the sample are ranked, with the lowest income being allocated rank 1. [69] For example, Sastre and Ayala conclude from their study of income Gini coefficient data between 1993 and 1998 for six developed economies that France had the least income mobility, Italy the highest, and the United States and Germany intermediate levels of income mobility over those five years. Income inequality and income mobility trends have been different for men and women workers between 1937 and the 2000s. Only 15 countries in the world have a Gini of 50 or more. Some of the world's poorest countries, such as the Central African Republic, have some of the highest Gini coefficients (61.3 in this case). The Gini co-efficient is an important tool for analyzing income or wealthdistribution within a country or region, but it should not be mistaken for an absolute measurement of income or wealth. Investopedia does not include all offers available in the marketplace. Typically, increases in the proportion of young or old members of a society will drive apparent changes in equality simply because people generally have lower incomes and wealth when they are young than when they are old. Top 10 Countries with the Lowest Income Inequality (Gini %): Slovakia 23.2; Slovenia 24.4; Belarus 24.4; Armenia 25.2 Gini indices measure inequality on a scale from zero, indicating perfect equality, to 100, indicating one person having all resources. Deininger and Squire (1996) show that the income Gini coefficient based on individual income rather than household income is different. This is attributed to globalization increasing incomes for billions of poor people, mostly in countries like China and India. ( If the population mean and boundary values for each interval are also known, these can also often be used to improve the accuracy of the approximation. i The Gini index measures the area between the Lorenz curve and a hypothetical line of absolute equality, expressed as a percentage of the maximum area under the line. are shown. 1 , https://en.wikipedia.org/w/index.php?title=Gini_coefficient&oldid=1165187106, This page was last edited on 13 July 2023, at 15:20. [72] This is because the Gini coefficient measures relative, not absolute, wealth. cases when income Lorenz Curves cross). Philippe Monfort has shown that using inconsistent or unspecified granularity limits the usefulness of Gini coefficient measurements.[80]. A Lorenz curve plots the cumulative percentages of total income received against the cumulative number of recipients, starting with the poorest individual. [24] The mean absolute difference is the average absolute difference of all pairs of items of the population, and the relative mean absolute difference is the mean absolute difference divided by the average, erf The Origins of the Gini Index: Extracts from Variabilit e Mutabilit (1912) by Corrado Gini, The Journal of Economic Inequality, September 2012, vol. Global inequality, as measured by the Gini index, has steadily increased over the past few centuries and spiked during the COVID-19 pandemic. , then: When the population is large, the income distribution may be represented by a continuous probability density function f(x) where f(x) dx is the fraction of the population with wealth or income in the interval dx about x. Gini coefficient: 0.35 (pretax + transfers: 0.48 . Finland is considered one of the most equal countries, and its Gini coefficient is lower (0.27 in 2017) than the others. Iceland has the most equal income distribution, with a Gini coefficient of 24.6% . Graphical Representation of the Gini Index. For example, taking the world economy as a whole and income distribution for all human beings, different scholars estimate the global Gini index to range between 0.61 and 0.68. GDP per capitais a metric that breaks down a country's GDP per person and is calculated by dividing the GDP of a country by its population.
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