A
measure of
income inequality.
We
plot the
proportion of income I(p) that the
poorest proportion p of the
population earns in an
economy against p in a
graph. (Eg I(0.8) = 0.2 means that the poorest 80% of the population earns only 20% of the total income. This is the case in the world economy today.)
If there is perfect income equality the graph of I(p) is the
line segment between (0,0) and (1,1), the line of perfect equality. Otherwise the graph of I(p) is an increasing,
convex curve that goes from (0,0) to (1,1) and lies below the line of perfect equality. The area between the line of perfect equality and the graph of I(p) is called the Gini coefficient. The less equal the income distribution, the larger the Gini coefficient.