What is the Gini coefficient?
Gini coefficient is statistics that is useful in measuring the distribution of wealth in the nation. As far as this statistics are concerned, the greater the number, which is between 0.0 and 1.0, the higher the degree of wealth inequality. Using the Gini coefficient, different countries can be compared to others in terms of distribution of even wealth. It can also detect economic trends in one country after a predetermined period of time. This chart contains a percentage of income in the vertical axis and the percentage of the population sharing on the horizontal axis. The direct diagonal line from the bottom left at the bottom to the upper upper upper part represents the perfect distribution of wealth. The real division of the wealth of the country is represented by a curved line that is the result of distribution inequality.
This curve, known as the Lorenzo curve, sinks under a straight diagonal line. How much it decreases below is the level of wealth inequality. The area of the gap is then divided by the whole of wealth in the country to reach the Gini coefficient.
When the coefficient is calculated for a specific country, the number generated by the equation always drops between 0.0 and 1.0. This is because 0.0 represents a country with a perfect division of wealth, which means that each individual in the country has exactly the same amount of money. The 1.0 coefficient represents the highest inequality in wealth, because it would mean that one individual holds all the wealth in the country and no one else has any. As the coefficient rises, the inequality of wealth increases in the country.
Practical use of Gini coefficient includes comparison of country differ and analysis of trends in a given country. The Gini coefficient has historically ranges from a minimum of approximately 0.2 to a maximum of about 0.6 for the Latin and Central American countries, where the rich elite contrasts with a large number of poor citizens. Studying Gini Level for Earth over time can also detect the appropriate trends. For example, a country that moved from communism to a capitalist economy,would probably see how their coefficient would increase after the change.