Gini Index

Posted in Finance, Accounting and Economics Terms, Total Reads: 574
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Definition: Gini Index

Gini index is a measure of the income distribution of a country and its deviation from a perfectly equal distribution. Countries with lower Gini index tend to have a relatively equal income distribution as compared to the ones with a higher Gini index.

 

Description:

A Lorenz curve shows the income distribution in terms of the % of total income held by a certain bottom percentage of the population. This curve is measured against a hypothetical perfect line of equality that assumes the income in an economy to be equally distributed among all the households of the economy. The further the Lorenz curve is away from the line of equality, higher would be the Gini index.

 

Gini index value ranges from 0-1 (in absolute terms), with 0 representing perfect equality and 1 representing perfect inequality.

 

India fares average on the Gini index with a World Bank Gini index value of 0.334. US, on the other hand, has a slightly higher Gini index value of 0.45, indicating more inequality in income distribution as compared to India.

 

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