GINI Coefficient

The Gini coefficient is a measure of income inequality within a country. It is usually expressed as a percentage or index where either 1 or 100% indicates "perfect" inequality and 0 or 0% indicates "perfect" equality of income distribution. The compiling of the Index requires that costly surveys be undertaken. Neither the IMF nor the World Bank computes Gini coefficients as part of their country missions and programs. Thus, the Gini coefficient has a rather sparse coverage in terms of countries and years available. Scandinavian countries have Gini coefficients of around 25%, continental European countries of around 30%, Anglo-Saxon countries of around 40%, many Latin American Countries of around 50-60%, and some African countries reach Gini coefficients of 60-70%. Definition The Gini coefficient is usually defined mathematically based on the Lorenz curve, which plots the proportion of the total income of the population (y axis) that is cumulatively earned by the bottom x% of the population (see diagram). The line at 45 degrees thus represents perfect equality of incomes. The Gini coefficient can then be thought of as the ratio of the area that lies between the line of equality and the Lorenz curve (marked 'A' in the diagram) over the total area under the line of equality (marked 'A' and 'B' in the diagram); i.e., G=A/(A+B). The Gini coefficient can range from 0 to 1; it is sometimes multiplied by 100 to range between 0 and 100. A low Gini coefficient indicates a more equal distribution, with 0 corresponding to complete equality, while higher Gini coefficients indicate more unequal distribution, with 1 corresponding to complete inequality. To be validly computed, no negative goods can be distributed. Thus, if the Gini coefficient is being used to describe household income inequality, then no household can have a negative income. When used as a measure of income inequality, the most unequal society will be one in which a single person receives 100% of the total income and the remaining people receive none (G=1); and the most equal society will be one in which every person receives the same percentage of the total income (G=0). Some find it more intuitive (and it is mathematically equivalent) to think of the Gini coefficient as half of the Relative mean difference. The mean difference is the average absolute difference between two items selected randomly from a population, and the relative mean difference is the mean difference divided by the average, to normalize for scale. Calculation
Fig: Graphical representation of the Gini coefficient

The Gini index is defined as a ratio of the areas on the Lorenz curve diagram. If the area between the line of perfect equality and the Lorenz curve is A, and the area under the Lorenz curve is B, then the Gini index is A/(A+B). Since A+B = 0.5, the Gini index, G = A/(0.5) = 2A = 1-2B. If the Lorenz curve is represented by the function Y = L(X), the value of B can be found with integration and:

GINI Index for countries

Country Bangladesh Least Developed Scandinavian Countries Countries Denmark Norway Sweden Finland Benin Ethiopia Rwanda Sierra Leone Madagascar Value 33.2 29 25 23 29.5 36.5 30 46.8 62.9 47.5

Source: CIA World Factbook

GINI Index of Bangladesh: Urban- Rural Comparison

Gini index of per capita expenditure 1991/92 National Urban Rural 26 31 25 1995/96 31 37 27 2000 31 37 27 2005 31 35 28

Source: HIES 2000 and 2005