GINI COEFFICIENT

&
ECONOMIC WELFARE
PRESENTED BY:
Ashima Goel
Ayushi Gupta
Neha Sagar
Saurav Kalia
Varun Kaushik
Vivek Khanna
Introduction
Gini Coefficient is a measure of inequality
developed by the Italian statistician Corrado
Gini
published in his 1912 paper Variabilità e
mutabilità
It is commonly used as a measure of inequality
of income or wealth.
Contd..
It is defined as a ratio and can range from 0
and 1 (0% to 100%)
The Gini index is the Gini coefficient expressed
as a percentage.
Gini index = gini coefficient *100
Calculation
The Ginicoefficient is calculated as a ratio of
areas on the Lorenz curve diagram.
for Gini coefficient to be an unbiased estimate
of the true population value,
it should be multiplied by n/(n-1).
Problems In
Measurement
Comparing income distributions among
countries may be difficult because benefits
systems may differ.
The measure will give different results when
applied to individuals instead of households
As for all statistics, there may be systematic
and random errors in the data.
countries may collect data differently
Lorenz curve
History
Definition
 Inequality by
Lorenz Curve
GINI COEFFICENT
&
Importance of Gini
coefficient
Ø It measures inequality by ratio analysis.
Ø Used to compare different income distribution
in sectors
Ø It can easily be interpreted
Ø Satisfies principles like anonymity, scale
independence ,population independence ,
transfer principle.
Limitations of GINI
coefficient
Ø Does not work for large population
Ø Economies with same gini and income can
have income variance.
Ø Only measures current income rather life time
Ø Does not include wealth income
Ø Must be cared with respect as measure of
egalitarianism
Ø More focus on time
Ø Growth of income cannot be measured