Gini coefficient

By:

James Knight

James is the Editor of Education for Invezz, where he covers topics from across the financial world, from the… read more.

Updated: Aug 20, 2021

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A measure of inequality derived from the Lorenz curve. As the degree of inequality increases, so does the curvature of the Lorenz curve, and thus the area between the curve and the 45° line becomes !arger. The Gini coefficient is measured as:

If there is perfect eq uality, the Lorenz curve would coincide with the 45° line, and so G = 0.

The Gini coefficient is also a statistical measure of inequality.

A value of 0 for the Gini coefficient denotes complete equality, and a value of 1 maximal inequality, i.e. all income is received by a single individual. Using the Lorenz curve diagram, the Gini coefficient can be found as the ratio of the area between the Lorenz curve and the straight line connecting the ends of the Lorenz curve to the total area under the straight line.

Reference: The Penguin Dictionary og Economics, 3rd edt.