Definition

# Gini Coefficient

Gini Coefficient is a statistical measure of income inequality in certain demography popularized by the Italian statistician, Corrado Gini. It is also termed as Gini index.  A Gini score of 0 implies perfect equality (in which every individual receives the same income). A Gini score of 1 implies perfect inequality (in which one individual receives all of the income).

Coefficients are the constants or numerals placed before the variables, in mathematical terms. The Gini index is often presented visually with the use of line graphs. So the numerals that express the measurements of the x and y-axis in a graph are coefficients and calculating the measurements along the vertical axis - x that entails the cumulative income of the population of a certain area to measure the income inequality there would be Gini Coefficient.

For example, if 99% of a country’s income belongs to 0.5% of the population the Gini coefficient of that country will be nearly 99% which means the income inequality is as high as it gets and the economy is on the verge of collapsing.

Higher GDP often fails to express the actual state of an economy since it does not focus on income distribution. On the other hand, a lower Gini coefficient (income inequality) means most people have their income in the same range and it paints a picture of a healthier economy.

Use of the Term in Sentences

• Gini coefficients are popular tools to determine economic inequality and income distribution so that the problem can be investigated.
• Economically not-so-advanced nations often have a very high Gini coefficient because a huge percentage of the population there live under the poverty line.

Category: Economics
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