What is Gini Coefficient?

Gini Coefficient is a measure of statistical dispersion intended to represent the income or wealth distribution of a nation’s residents and is the most commonly used measure of inequality. The Gini coefficient measures the inequality among values of a frequency distribution (for example, levels of income). A Gini coefficient of zero expresses perfect equality, where all values are the same (for example, where everyone has the same income). A Gini coefficient of 1 (or 100%) expresses maximal inequality among values (e.g., for a large number of people, where only one person has all the income or consumption, and all others have none, the Gini coefficient will be near one). However, a value greater than one may occur if some person represents negative contribution to the total (for example, having negative income or wealth). For larger groups, values close to or above 1 are very unlikely in practice. Given the normalization of both the cumulative population and the cumulative share of income used to calculate the Gini coefficient, the measure is not overly sensitive to the specifics of the income distribution, but rather only on relative variations of incomes. The exception to this is the redistribution of wealth resulting in a minimum income for all people.

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