Gini Index

DEFINITION of 'Gini Index'

A measurement of the income distribution of a country's residents. This number, which ranges between 0 and 1 and is based on residents' net income, helps define the gap between the rich and the poor, with 0 representing perfect equality and 1 representing perfect inequality.

BREAKING DOWN 'Gini Index'

The index is named after its developer, Corrado Gini, an Italian statistician of the early 20th century. It is typically expressed as a percentage, so a 20 coefficient would be shown as 20%.

Don't mistake the measurement of income distribution with the measurement of wealth. A wealthy country and a poor country can have the same Gini coefficient, even if the wealthy country has a relatively equal distribution of affluent residents and the poor country has a relatively equal distribution of cash-strapped residents.

The Gini index is only as accurate as the gross domestic product (GDP) and income data that a country produces. Many developing nations do not produce accurate or trusted economic data, so the index becomes more of an estimate. There is also a generally negative correlation between Gini coefficients and per-capita GDP, because poorer nations tend to have higher index figures.

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