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Gini Coefficient Calculator

Gini Coefficient Formula

units²
units²

1. What is the Gini Coefficient Calculator?

Definition: The Gini Coefficient Calculator measures income inequality within a population using the ratio of the area between the Lorenz curve and the line of equality to the total area under the line of equality.

Purpose: Helps economists and policymakers assess income distribution and social equity trends.

2. How Does the Calculator Work?

The calculator computes the Gini coefficient using the following formula and steps:

Formula:

\( G = \frac{A}{A + B} \)
Where:
  • \( G \): Gini coefficient (unitless, 0 to 1)
  • \( A \): Area between the Lorenz curve and the line of equality (units²)
  • \( B \): Area under the Lorenz curve (units²)

Steps:

  • Step 1: Determine Area A. Input the area above the Lorenz curve and below the line of equality.
  • Step 2: Determine Area B. Input the area below the Lorenz curve.
  • Step 3: Calculate Gini Coefficient. Divide Area A by the sum of Area A and Area B.

3. Importance of Gini Coefficient Calculation

Calculating the Gini coefficient is crucial for:

  • Inequality Assessment: Quantifies income disparities in economies.
  • Policy Development: Informs tax and welfare policies to reduce inequality.
  • Social Analysis: Supports studies on poverty and social mobility.

4. Using the Calculator

Example: Area A = 1,200 units², Area B = 3,800 units²:

  • Step 1: Area A = 1,200 units².
  • Step 2: Area B = 3,800 units².
  • Step 3: \( G = \frac{1,200}{1,200 + 3,800} = \frac{1,200}{5,000} = 0.24 \).
  • Result: Gini Coefficient = 0.24.

A Gini coefficient of 0.24 indicates moderate income inequality.

5. Frequently Asked Questions (FAQ)

Q: What is the Gini coefficient?
A: The Gini coefficient is a measure of income inequality, ranging from 0 (perfect equality) to 1 (perfect inequality).

Q: How is the Lorenz curve related to the Gini coefficient?
A: The Gini coefficient is the ratio of the area between the Lorenz curve and the line of equality (A) to the total area under the line (A + B).

Q: What does a Gini coefficient of 0.24 mean?
A: It suggests relatively low inequality, typical of developed economies, though context varies by region.

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