Gini coefficient

The Gini coefficient measures how unevenly a quantity is distributed across a population. It is most commonly applied to income, although it can also be used for consumption, wealth and other distributions. Italian statistician Corrado Gini developed the measure in work published in 1912; it is also known as the Gini index or Gini ratio. In economics, researchers and statistical agencies use it as a compact indicator of income or consumption inequality, not as a direct measure of a population's average prosperity.

A common way to understand the coefficient is through the Lorenz curve. First, people or households are ordered from the lowest to the highest income. The curve then plots the cumulative share of total income received against the cumulative share of the population. If every person received the same income, the curve would follow a diagonal line of equality. The Gini coefficient is the area between that line and the observed Lorenz curve, divided by the total area beneath the line. A curve that bows farther from equality produces a higher value. The same idea can be expressed as the average absolute difference between pairs of incomes, normalized by twice the mean. On the usual normalized scale for nonnegative values, 0 means complete equality and 1 means the maximum concentration; statistical tables may multiply the value by 100 and report an index from 0 to 100. When a distribution includes negative values, some Gini calculations can exceed 1, so comparisons also depend on the chosen convention.

Because it condenses a complex distribution into one statistic, the Gini coefficient is useful for summarizing inequality within a country or population and tracking it over time. Governments and researchers may use it when evaluating the distributional context of taxes, transfers, labour-market change or economic growth. It can also be compared across places, provided the underlying observations are sufficiently comparable. For example, the OECD defines the income used in its indicator as household disposable income after taxes and social-security contributions, while World Bank series may draw on surveys measuring income or consumption. Those choices affect the result and should accompany any interpretation.

The Gini coefficient is a relative measure: it describes how a distribution is spread, not the amount of income people have. A low Gini does not by itself mean that a society is affluent, and a rising Gini can occur even while poverty falls if gains are distributed unevenly. Different distributions can also produce the same Gini, so the statistic does not show where in the income range inequality occurs or explain its causes. It is not additive across groups: a national Gini cannot be obtained by simply averaging regional Gini values. International comparisons require care because household surveys can differ in their definitions of income, treatment of household size, and use of consumption rather than income. Analysts therefore often examine the Gini alongside measures such as poverty rates, income shares and the Lorenz curve.