13 Jul 2023 15:15:01. Using the Gini can help quantify differences in welfare and compensation policies and philosophies. For the United States, the country with the largest population among OECD countries, the pre-tax Gini index was 0.49, and the after-tax Gini index was 0.38 in 20082009. Similar in concept to the Gini income coefficient, the Gini opportunity coefficient measures inequality in opportunities. Depending on the country and year, the data relates to either disposable income or consumption per capita. You can learn more about the standards we follow in producing accurate, unbiased content in our. Bell and Liberati claim that ranking income inequality between two populations is not always possible based on their Gini indices. Who, What, Why: What is the Gini coefficient? - BBC News The Gini index, or Gini co-efficient, measures income distribution across a population. 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. i The combined income is now split into more households. It measures inequality in income after considering the effect of taxes and social spending already in place in a country. ) Education vs. Though useful for analyzing economic inequality, the Gini co-efficient has some shortcomings. These measures attempt to compare the distribution of resources by intelligent agents in the market with a maximum entropy random distribution, which would occur if these agents acted like non-interacting particles in a closed system following the laws of statistical physics. The inverse Simpson index increases with diversity, unlike the Simpson index and Gini coefficient, which decrease with diversity. America is the #39 most unequal country in the world, based on the CIA-recognized Gini index. In the U.S., poverty is a growing issue, where an estimated 12.3-17.8 percent below the poverty level (see Poverty Rate by Country). 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). Income inequality and income mobility trends have been different for men and women workers between 1937 and the 2000s. Thus a Gini index of 0 represents perfect equality, while an index of 100 implies perfect inequality. [ = Defining as the mean of the distribution, and specifying that F(y) is zero for all negative values, the Gini coefficient is given by: The latter result comes from integration by parts. 2 Below is a chart for all countries where data are available. {\displaystyle (y_{i}These Countries Have Income Equality | U.S. News A simplified case distinguishes just two levels of income, low and high. The COVID-19 pandemic has exacerbated many existing inequalities. Amanda Bellucco-Chatham is an editor, writer, and fact-checker with years of experience researching personal finance topics. While the income distribution of any particular country will not correspond perfectly to the theoretical models, these models can provide a qualitative explanation of the income distribution in a nation given the Gini coefficient. According to UNICEF, Latin America and the Caribbean region had the highest net income Gini index in the world at 48.3, on an unweighted average basis in 2008. , so that Both countries have a Gini coefficient of 0.2, but the average income distributions for household groups are different. Gini Index Income Inequality World Map - Business Insider Changing income inequality, measured by Gini coefficients, can be due to structural changes in a society such as growing population (increased birth rates, aging populations, increased divorce rates, extended family households splitting into nuclear families, emigration, immigration) and income mobility. [73] Household money income distribution for the United States, summarized in Table C of this section, confirms that this issue is not limited to just Hong Kong. {\displaystyle G=2\Phi \left({\frac {\sigma }{\sqrt {2}}}\right)-1} A Gini of 50 marks the halfway point and can generally be perceived as a place where income is not fairly distributed. FactCheck: is South Africa the most unequal society in the world? GINI index (World Bank estimate) - Country Ranking. Here are the ten most unequal countries in . {\displaystyle f(y_{i})} The Gini coefficient calculated from a sample is a statistic, and its standard error, or confidence intervals for the population Gini coefficient, should be reported. is the cumulative distribution function of a standard normal distribution). The model then expresses the rank (dependent variable) as the sum of a constant A and a normal error term whose variance is inversely proportional to yk: Thus, G can be expressed as a function of the weighted least squares estimate of the constant A and that this can be used to speed up the calculation of the jackknife estimate for the standard error. = i , equals 1 for all j units in some population (for example, there is perfect income equality when everyone's income Gross domestic product is the monetary value of all finished goods and services made within a country during a specific period. Top 10 Countries with the Lowest Income Inequality (Gini %): Slovakia 23.2; Slovenia 24.4; Belarus 24.4; Armenia 25.2 For example, if y follows a log-normal distribution with the standard deviation of logs equal to 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. \mu Iceland has the most equal income distribution, with a Gini coefficient of 24.6% . It takes negative values for the class of decreasing failure rate distributions and point processes with decreasing failure intensity rate and is positive for the increasing failure rate distributions and point processes with increasing failure intensity rate. Deininger and Squire (1996) show that the income Gini coefficient based on individual income rather than household income is different. , where A higher Gini index indicates greater inequality, with high-income individuals receiving much larger percentages of the populations total income. x_{j} [101], A 2005 study accessed US census data to measure home computer ownership and used the Gini coefficient to measure inequalities amongst whites and African Americans. Another limitation of the Gini coefficient is that it is not a proper measure of egalitarianism, as it only measures income dispersion. [73] Gini coefficients are simple, and this simplicity can lead to oversights and can confuse the comparison of different populations; for example, while both Bangladesh (per capita income of $1,693) and the Netherlands (per capita income of $42,183) had an income Gini coefficient of 0.31 in 2010,[74] the quality of life, economic opportunity and absolute income in these countries are very different, i.e. (Note that this formula can be applied when there are negative values if the integration is taken from minus infinity to plus infinity. [61][62][63] The concept builds on Amartya Sen's suggestion[64] that inequality coefficients of social development should be premised on the process of enlarging people's choices and enhancing their capabilities, rather than on the process of reducing income inequality. is the fraction of the population with income or wealth The value of zero corresponds to the exponential life distribution or the Homogeneous Poisson Process. r Philippe Monfort has shown that using inconsistent or unspecified granularity limits the usefulness of Gini coefficient measurements.[80]. Inequality of income is prevalent in sub-Saharan Africa with 32 countries lying in the final 2 . The Gini coefficient measures the inequality among the values of a frequency distribution, such as levels of income. GINI index (World Bank estimate) 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. {\bar {x}} While the Gini coefficient is a useful tool for analyzing the wealth or income distribution in a country, it does not indicate that country's overall wealth or income. Food and Agriculture Organization of the United Nations. A high-income country and a low-income country can have the same Gini coefficients. Kaminskiy and Krivtsov[106] extended the concept of the Gini coefficient from economics to reliability theory and proposed a Ginitype coefficient that helps to assess the degree of aging of nonrepairable systems or aging and rejuvenation of repairable systems. Gini has some mathematical limitations as well. This is because the Gini coefficient measures relative, not absolute, wealth. Education Gini index estimates the inequality in education for a given population. However, the relationship between income inequality and GDP per capita is not one of perfect negative correlation, and the relationship has varied over time. Results indicated that although decreasing overall, home computer ownership inequality was substantially smaller among white households.[102]. These 15 countries have the biggest gaps between rich and poor - USA TODAY | [45], The Gini coefficient and other standard inequality indices reduce to a common form. {\overline {x}} Income inequality: Gini coefficient - Our World in Data \lambda Gini coefficient: 0.35 (pretax + transfers: 0.48 . The results compare favorably with the estimates from the jackknife with agreement improving with increasing sample size.[41]. 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. Developed by Italian statistician Corrado Gini in 1912, it often serves as a. where pj weights the units by their population share, and f(rj) is a function of the deviation of each unit's rj from 1, the point of equality. This is attributed to globalization increasing incomes for billions of poor people, mostly in countries like China and India. 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. The United States ranks as the 7th most unequal country in the world, with a Gini coefficient of 39.1% . In absence of a free market, valuing these income transfers as household income is subjective. Countries ranked by GINI index (World Bank estimate) - IndexMundi Back to Top Basic Facts About Income Inequality Global inequality has been declining fast since 1990s. The extreme cases are represented by the most equal of society in which every person receives the same income (G = 0) and the most unequal society (composed of N individuals) where a single person receives 100% of the total income and the remaining N 1 people receive none (G = 1 1/N). 1 A Formula for the Gini Coefficient.. The indicator is available from 1968 to 2022. U.S. Income Distribution: Just How Unequal? Developed by Italian statistician Corrado Gini in 1912, the Gini coefficient ranges from 0 to 1, but is often written as a percentage. The Latest Numbers Available, What's Poverty? cases when income Lorenz Curves cross). ( (1988). Another flaw is that very different income distributions can result in identical Gini co-efficients. 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. Definition ofIncome inequality. As the most gender equal country in the world, we applaud today's decision by @ICC to award equal prize money in male and female events. [72] This is because the Gini coefficient measures relative, not absolute, wealth. "Concentration and dependency ratios" (in Italian). Note however Allison's reply on the need to divide by N instead. [86][87] Different assumptions and quantifications of these incomes will yield different Gini coefficients.[88][89][90]. OECD Income (IDD) and Wealth (WDD) Distribution Databases.. Kovacevic, in a review of the Gini opportunity coefficient, explained that the coefficient estimates how well a society enables its citizens to achieve success in life where the success is based on a person's choices, efforts and talents, not their background defined by a set of predetermined circumstances at birth, such as gender, race, place of birth, parent's income and circumstances beyond the control of that individual. Even in developed economies, 8% (United States) to 27% (Italy) of each nation's GDP is informal. The World Bank, World Bank Open Data. Central America & the Caribbean Schneider et al., in their 2010 study of 162 countries,[84] report about 31.2%, or about $20 trillion, of world's GDP is informal. X Source: Michail Moatsos and Joery Baten. \Phi https://en.wikipedia.org/w/index.php?title=Gini_coefficient&oldid=1165187106, This page was last edited on 13 July 2023, at 15:20. 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Graphical Representation of the Gini Index. It is possible for two different Lorenz curves to give rise to the same Gini coefficient. ) The Gini coefficient was developed by the Italian Sociologist and statistician Corrado Gini to measure an economy's level of income inequality. 1 6 facts about economic inequality in the U.S. A country in which every resident has the same income would have an income Gini co-efficient of 0. Thus a Gini index of 0 represents perfect equality, while an index of 100 implies perfect inequality. Poverty and Shared Prosperity 2020: Reversals of Fortune., U.S. Central Intelligence Agency, The World Factbook. Here are the ten most unequal countries. [11] The Gini coefficient of the global income in 2005 has been estimated to be between 0.61 and 0.68 by various sources. equals the mean income For a discrete probability distribution with probability mass function Top 10 Countries with the Highest Gini Coefficients (%) - World Bank: South Africa - 2014 - 63.0 Namibia - 2015 - 59.1 Suriname - 1999 - 57.9 Correlation between Gini co-efficients and GDP per capita in three time periods. Perfect equalitythe absence of inequalityexists when and only when the inequality ratio, This is a list of countries by distribution of wealth, including Gini coefficients.Wealth distribution can vary greatly from income distribution in a country (see List of countries by income equality).. Higher Gini coefficients signify greater wealth inequality, with 0 being complete equality, whereas a value near 1 can .