January 20, 2007

The Gini coefficient

The Gini coefficient is a measure of the distribution of wealth within a population. The idea is simple: line up the entire population, with the poorest person on the left end and the richest person on the right. As you go down the line, take the total income of everyone to the left (so the first person has just their own income counted, the last person has everyone's income counted). This plots a curve that kind of swoops up from the lower-left corner to the upper-right. Now measure the area between this curve and the straight line from the lower-left corner to the upper-right, and divide that by the triangular area under the straight line. This gives you a ratio between the actual distribution of wealth and the perfectly equal distribution of wealth. Multiply that ratio by 100, and you have the Gini coefficient.

Since a larger ratio means there's more of a gap between reality and the perfectly equal distribution, a coefficient of 0 means perfect equality (everyone's income is exactly the same), while a coefficient of 100 means perfect inequality (one person gets all the money). Here is an alphabetical list of countries and their Gini coefficients, measured in various years.

According to this list, in 2004, the Gini coefficient for the US was 45. Here's a list of the other countries whose most recent Gini coefficient calculation, according to this list, was between 40 and 50: Armenia, Burundi, Cambodia, Cameroon, PRC, Costa Rica, Cote d'Ivoire, Ecuador, Georgia, Guinea, Guinea-Bissau, Iran, Kenya, Madagascar, Malaysia, Mexico, Mongolia, Nicaragua, Nigeria, Philippines, Senegal, Singapore, Thailand, Trinidad and Tobago, Tunisia, Turkey, Turkmenistan, Uruguay, and Venezuela.

Those are our peers. The list of countries with a lower Gini coefficient (remember, lower means more egalitarian) is way too long to list here. But here's a list of countries those coefficients are between 30 and 40: Algeria, Australia, Austria, Bangladesh, Belgium, Burkina Faso, Canada, Egypt, Estonia, Ethiopia, France, Greece, India, Indonesia, Ireland, Italy, Jamaica, Japan, Jordan, Kazakhstan, South Korea, Laos, Latvia, Lithuania, Mauritania, Moldova, Mozambique, Netherlands, New Zealand, Pakistan, Portugal, Romania, Spain, Sri Lanka, Switzerland, Tajikistan, Tanzania, the UK, Vietnam, and Yemen. These are the countries whose incomes are distributed somewhat more equally than in the US.


MosBen said...

So how much difference is there in real world terms for a ten point spread in the Gini coefficient? Someone not well versed in statistics and inclined to an optimistic view of our society (I'm more the former than the latter) might read that and say, "Ten point difference? That's not so bad! Sure we could improve, but that's nothing to get excited about!"

Noumena said...

Doing that kind of translation is tough, because the coefficient is telling you the way money is distributed over society as a whole, and not things like how many people are living in poverty, or how much wealthier the last person is, compared to the first. Notice, for example, that Laos and Switzerland are in the same, 30-40, list.

My point here is just to encourage people to think about what these lists say about what countries the US is like, and what countries the US is unlike. Notice, for example, that the US and the PRC are the only two major economic or military powers on their list, and that most of the Global North countries have coefficients less than 40.

bathmate said...

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