Gini Index

AAA

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.

INVESTOPEDIA EXPLAINS'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.

RELATED TERMS
  1. Gross Domestic Product - GDP

    The monetary value of all the finished goods and services produced ...
  2. 80-20 Rule

    A rule of thumb that states that 80% of outcomes can be attributed ...
  3. Upper Class

    A socioeconomic term used to describe individuals who reside ...
  4. Continuously Offered Longer-Term ...

    A type of bond that's been sold by the World Bank since 1989 ...
  5. Net Worth

    The amount by which assets exceed liabilities. Net worth is a ...
  6. Net Income - NI

    1. A company's total earnings (or profit). Net income is calculated ...
Related Articles
  1. Fundamental Analysis

    A Guide To Global Investment Performance Standards

    Is your investment management firm GIPS compliant? Learn more here.
  2. Mutual Funds & ETFs

    How Mutual Funds Differ Around The World

    Learn which country has the strictest rules on mutual fund construction and why.
  3. Fundamental Analysis

    An Evaluation Of Emerging Markets

    Get the full story on this asset class before you write it off as too risky.
  4. Economics

    Cashing In On Macroeconomic Trends

    Learn to identify the things that may impact your investments down the road.
  5. Economics

    The True Unemployment Rate: U6 Vs. U3

    Learn how to distinguish between the U-3 and U-6 unemployment rates, and explore which rate provides a truer picture of unemployment.
  6. Economics

    Explaining the Liquidity Coverage Ratio

    The liquidity coverage ratio requires banks and other financial institutions to hold enough cash and liquid assets on hand to weather market stress.
  7. Fundamental Analysis

    Calculating Valuation

    Valuation is the process of determining what an asset is worth.
  8. Economics

    Will the Selloff in China Hurt the Global Economy?

    Though China is the world’s second largest economy, its volatility in the stock market is unlikely to have an impact on the global or Chinese economy.
  9. Fundamental Analysis

    Understanding Qualitative Analysis

    Qualitative analysis is a general term describing the non-mathematical scrutiny used by investors and managers to make investment and business decisions.
  10. Economics

    Signs The U.S. Recovery Is Solid

    Many market observers lately have been making some pretty pessimistic evaluations of the U.S. economy, declaring that it’s stagnating and soft.
RELATED FAQS
  1. What assumptions are made when conducting a t-test?

    The common assumptions made when doing a t-test include those regarding the scale of measurement, random sampling, normality ... Read Full Answer >>
  2. What are some of the more common types of regressions investors can use?

    The most common types of regression an investor can use are linear regressions and multiple linear regressions. Regressions ... Read Full Answer >>
  3. What types of assets produce negative portfolio variance?

    Assets that have a negative correlation with each other produce negative portfolio variance. Variance is one measure of the ... Read Full Answer >>
  4. When is it better to use systematic over simple random sampling?

    Under simple random sampling, a sample of items is chosen randomly from a population, and each item has an equal probability ... Read Full Answer >>
  5. What are some common financial sampling methods?

    There are two areas in finance where sampling is very important: hypothesis testing and auditing. The type of sampling methods ... Read Full Answer >>
  6. How can I measure portfolio variance?

    Portfolio variance measures the dispersion of returns of a portfolio. It is calculated using the standard deviation of each ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Nanny Tax

    A federal tax that must be paid by people who hire household help (a babysitter, maid, gardener, etc.) and pay them a total ...
  2. Dog And Pony Show

    A colloquial term that generally refers to a presentation or seminar to market new products or services to potential buyers.
  3. Topless Meeting

    A meeting in which participants are not allowed to use laptops. A topless meeting organizer can also ban the use of smartphones, ...
  4. Hedging Transaction

    A type of transaction that limits investment risk with the use of derivatives, such as options and futures contracts. Hedging ...
  5. Bogey

    A buzzword that refers to a benchmark used to evaluate a fund's performance. The benchmark is an index that reflects the ...
  6. Xetra

    An all-electronic trading system based in Frankfurt, Germany. Launched in 1997 and operated by the Deutsche Börse, the Xetra ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!