1. What is the Gini Coefficient?

The Gini coefficient is a measure of statistical dispersion intended to represent income inequality or wealth inequality within a nation or any other group of people. It ranges from 0 (perfect equality) to 1 (perfect inequality).

2. How Does the Calculator Work?

The calculator uses the Gini coefficient formula:

Where:

• \( Differences \) — Sum of absolute differences between all pairs of incomes
• \( n \) — Number of observations
• \( Mean \) — Mean income of the population

Explanation: The coefficient measures the extent to which the distribution of income among individuals deviates from a perfectly equal distribution.

3. Importance of Gini Coefficient

Details: The Gini coefficient is widely used in economics to measure inequality. It helps policymakers understand income distribution and implement appropriate economic policies.

4. Using the Calculator

Tips: Enter the total of all absolute differences between income pairs, the number of observations, and the mean income. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: What does a Gini coefficient of 0.4 mean?
A: A coefficient of 0.4 typically indicates a moderate level of inequality. Many developed countries have coefficients between 0.24 and 0.36.

Q2: What are the limitations of the Gini coefficient?
A: It doesn't show the actual distribution and can be sensitive to changes in the middle of the distribution while being less sensitive at the extremes.

Q3: How is the Gini coefficient related to the Lorenz curve?
A: The Gini coefficient is the ratio of the area between the Lorenz curve and the line of equality to the total area under the line of equality.

Q4: Can the Gini coefficient be greater than 1?
A: In theory, no. The coefficient ranges from 0 (perfect equality) to 1 (perfect inequality).

Q5: What's considered a "good" Gini coefficient?
A: There's no universal standard, but generally lower values (closer to 0) indicate more equal distribution of income.