Measuring inequality: What is the Gini coefficient?

Abstract

The Gini coefficient, a common index of inequality, measures the disparity of income or wealth distribution. It quantifies income inequality on a scale of 0 to 1, where 1 indicates perfect inequality and 0 represents perfect equality. The index can be computed using two methods. The first method calculates the average income gap between any two individuals relative to the mean income, while the second method assesses the deviation of the Lorenz curve, which graphically represents the cumulative share of population and income, from perfect equality. Unlike other inequality measures that are more sensitive to changes in the top or bottom of the income distribution, the Gini coefficient focuses on changes in the middle of the distribution. – AI-generated abstract.