The Gini coefficient, sometimes called the Gini Index or Gini ratio, is a statistical measure of distribution intended to represent the income or wealth distribution of a nation. The Gini coefficient was developed by Italian statistician Corrado Gini in 1912 and is the most commonly used measurement of wealth or income inequality.
The Gini coefficient ranges from 0 (0%) to 1 (100%), with 0 representing perfect equality and 1 representing perfect inequality. A higher Gini coefficient means greater inequality. If every resident of a nation had the same income, the Gini coefficient would be zero. If one resident earned all of the income in a nation and the rest earned zero, the Gini coefficient would be 1.
Mathematically, the Gini coefficient is defined based on the Lorenz curve. The Lorenz curve plots the percentiles of the population on the graph's horizontal axis according to income or wealth, whichever is being measured. The cumulative income or wealth of the population is plotted on the vertical axis.
While the Gini coefficient is a useful tool for analyzing the wealth or income distribution in a country, it should not indicate a country's overall wealth or income. Some of the world's poorest countries, such as the Central African Republic, have some of the highest Gini coefficients (61.3 in this case). A high-income country and a low-income country can have the same Gini coefficients. Additionally, due to limitations such as reliable GDP and income data, the Gini index may overstate income inequality and be inaccurate.
Income inequality has political and economic impacts such as slower GDP growth, reduced income mobility, greater household debt, political polarization, and higher poverty rates.
According to World Bank's Poverty and Shared Prosperity 2020 report, the Gini coefficient increases about 1.5 points in the five years following major epidemics, such as H1N1 (2009), Ebola (2014), and Zika (2016). The Gini coefficient saw sustained growth during the 19th and 20th centuries. In 1820, the Gini coefficient was 0.50 and in 1980 and 1992, the figure was 0.657.
The countries with the highest Gini coefficients are:
- Lesotho (0.632)
- South Africa (0.625)
- Haiti (0.608)
- Botswana (0.605)
- Namibia (0.597)
- Zambia (0.575)
- Comoros (0.559)
- Hong Kong (0.539)
- Guatemala (0.530)
- Paraguay (0.517)
South Africa is one of the world's most unequal countries, with a Gini coefficient of 0.625. In 2005, the Gini coefficient was even higher, at 0.650. In South Africa, the richest 10% hold 71% of the wealth, while the poorest 60% hold just 7% of the wealth. Additionally, more than half of South Africa's population, about 55.5%, live in poverty, earning less than $83 per month.
The United States has a Gini coefficient of 0.480. In 1990, the Gini coefficient was 0.43, indicating an overall increase in income inequality over the last 30 years. In 2015, the top 1% of earners in the United States averaged 40 times more income than the bottom 90%. In the U.S., poverty is an increasing issue, with about 33 million workers earn less than $10 per hour, putting a family of four below the poverty level. Many of these low-wage workers have no sick days, pension, or health insurance.
Many European countries have some of the lowest Gini coefficients, such as Slovakia, Slovenia, Sweden, Ukraine, Belgium, and Norway. Inequality is generally lower in European nations than it is in non-European nations. The Nordic countries and Central Eastern European countries are among the most equal countries.