Gini Coefficient Calculator
Measure of statistical dispersion intended to represent income inequality.
Formula first
Overview
The Gini coefficient is a statistical measure of economic inequality that quantifies the dispersion of income or wealth among a population. It is derived from the Lorenz curve, where 'A' represents the area between the line of perfect equality and the Lorenz curve, and 'B' represents the area beneath the curve.
Symbols
Variables
Gini = Gini Coeff, A = Area A, B = Area B
Apply it well
When To Use
When to use: Use this formula when evaluating income distribution across different countries or analyzing wealth gaps within a single region over time. It is particularly useful for comparing the effectiveness of tax systems and social welfare programs in reducing inequality.
Why it matters: The Gini coefficient provides a single, easy-to-understand metric for social equity, helping international organizations like the World Bank identify regions at risk of social instability. A higher coefficient suggests significant disparity, which can impact economic growth and political stability.
Avoid these traps
Common Mistakes
- Swapping A and B.
One free problem
Practice Problem
A researcher studying a small town finds that the area between the line of equality and the Lorenz curve (A) is 0.12, while the area under the Lorenz curve (B) is 0.38. Calculate the Gini coefficient.
Solve for:
Hint: Divide the area A by the total area of the triangle (A + B).
The full worked solution stays in the interactive walkthrough.
References
Sources
- Wikipedia: Gini coefficient
- Britannica: Gini index
- Britannica: Gini coefficient
- Mankiw, N. Gregory. Principles of Economics. 9th ed. Cengage Learning, 2021.
- The World Bank: Gini index (World Bank estimate)
- Principles of Economics by N. Gregory Mankiw
- World Bank Data
- OECD Income Distribution Database