1. What is the Gini Coefficient?

The Gini coefficient is a measure of statistical dispersion intended to represent income inequality within a nation or any group of people. A Gini coefficient of 0 expresses perfect equality where everyone has the same income, while a coefficient of 1 expresses maximal inequality.

2. How Does the Calculator Work?

The calculator uses the standard Gini coefficient formula:

Where:

• The Lorenz curve plots the cumulative percentage of total income received against the cumulative percentage of recipients
• The area between the line of equality and the Lorenz curve is calculated using the trapezoidal rule
• The Gini coefficient is then derived from this area

Explanation: The calculation involves sorting incomes, calculating cumulative percentages, and summing the areas under the Lorenz curve.

3. Importance of Gini Coefficient

Details: The Gini coefficient is widely used in economics to measure inequality. It helps policymakers understand income distribution and evaluate the effectiveness of economic policies.

4. Using the Calculator

Tips: Enter income values separated by commas (e.g., "50000, 60000, 70000"). The calculator will sort the values and compute the Gini coefficient automatically.

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 income inequality. Many developed countries fall in the 0.24-0.36 range.

Q2: What are the limitations of the Gini coefficient?
A: It doesn't show where the inequality occurs, can be sensitive to outliers, and doesn't account for population demographics.

Q3: Can the Gini coefficient be greater than 1?
A: Normally no, as it's defined between 0 and 1. Values above 1 may occur with negative incomes in theoretical cases.

Q4: How does this compare to other inequality measures?
A: Unlike the Palma ratio or Theil index, the Gini gives a single number summarizing the entire distribution.

Q5: Should I use pre-tax or post-tax incomes?
A: Typically post-tax and post-transfer incomes are used to measure actual inequality after redistribution.