GINI COEFFICIENT &

ECONOMIC WELFAREPRESENTED BY:

Ashima GoelAyushi Gupta

Neha SagarSaurav Kalia

Varun KaushikVivek Khanna

IntroductionGini Coefficient is a measure of inequalitydeveloped by the Italian statistician Corrado

Ginipublished in his 1912 paper Variabilità e

mutabilitàIt is commonly used as a measure of

inequality of income or wealth.

Contd..It is defined as a ratio and can range from 0

and 1 (0% to 100%)The Gini index is the Gini coefficient

expressed as a percentage.Gini index = gini coefficient *100

CalculationThe Gini coefficient is calculated as a ratio of

areas on the Lorenz curve diagram. for Gini coefficient to be an unbiased

estimate of the true population value, it should be multiplied by n/(n-1).

Problems In MeasurementComparing income distributions among

countries may be difficult because benefits systems may differ.

The measure will give different results when applied to individuals instead of households

As for all statistics, there may be systematic and random errors in the data.

countries may collect data differently

Lorenz curveHistoryDefinition

Inequality by Lorenz Curve

GINI COEFFICENT&

LORENZ CURVE

Importance of Gini coefficientIt measures inequality by ratio analysis.Used to compare different income

distribution in sectorsIt can easily be interpretedSatisfies principles like anonymity, scale

independence ,population independence , transfer principle.

Limitations of GINI coefficientDoes not work for large populationEconomies with same gini and income can

have income variance.Only measures current income rather life

time Does not include wealth incomeMust be cared with respect as measure of

egalitarianismMore focus on timeGrowth of income cannot be measured