Gini coef cient:

It is an index which measures the distribution of income across a population. The

coef cient ranges from (0%) 0 to (100%) 1.
• 0 represents perfect equality whilst 1 represents perfect inequality
• Values over 1 are theoretically possible due to negative income or wealth (debt

Key takeaways:
• The Gini index is a measure of the distribution of income across a population

• A higher Gini index indicates greater inequality, with high-income individuals

receiving much larger percentages of the total income of the population

• Global inequality as measured by the Gini index increased over the 19th and 20th
centuries, but has declined in more recent years

• Because of data and other limitations, the Gini index may overstate income
inequality and can obscure important information about income distribution

The gini index is represented graphically through the Lorenz curve* as shown in the graph below.

The Gini coef cient is equal to the area below the line of perfect equality (0.5 by de nition)
minus the area below the Lorenz curve, divided by the area below the line of perfect
equality

OR

it is double the area between the Lorenz curve and the line of perfect equality

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Some of the world's poorest countries (Central African Republic) have some of the world's
highest Gini coef cients (61.3), while many of the wealthiest (Denmark) have some of the
lowest (28.8). Yet the relationship between income inequality and GDP per capita is not
one of perfect negative correlation, and the relationship has varied over time.

*Lorenz curve: it’s a curve which shows income (or wealth) distribution by plotting the population percentile by income
on the horizontal axis and cumulative income on the vertical axis

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How can we utilise this for the IA?

• We can look for existing data and calculate the Gini Coef cient for 2 different years for
Egypt and compare and come up with a conclusion

• We can look for existing data and calculate the Gini Coef cient for 2 different countries
and compare and come up with a conclusion.

• We can do both of the above at once but then compare between both countries’ between
the change in the Gini coef cient for both countries, and come up with a conclusion.
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