The Gini index

One of the most serious problems for developing countries is the income inequality.The greater its scale, the more people in the country are beginning to feel a sense of injustice.Lack of money leads to a constant concern for the next day, which can lead to different extremes.

In the twentieth century, economists have found a way to measure the sense of justice with respect to the distribution of income by using different statistical methods.The Gini index is just one of these indicators.This indicator has appeared in the economy in 1912 thanks to the Italian demography and statistics Corrado Gini.

Gini coefficient allows the calculation of the inequality of income distribution in the country.Its values ​​range from 0 to 1. The lower the value takes the Gini index, the more evenly distributed income in the state.Conversely, if the indicator tends to unity, most of the income is concentrated in the hands of a small part of the population.

Gini coefficient.Calculation

calculation of this indicator be produced by using the Lorenz curve diagram.Let the area bounded by the Lorenz curve and the line of perfection as A, and the area below as B. Then, the Gini index is equal to a quotient obtained by dividing A by (A + B).Since A + B = 0.5, then our indicator can be calculated as follows: A = 2 * A = 1-2 * B.If you express the ratio as a function of the Lorentz Y = L (X), then the value of B can be found using the integral.

general situation in the world is as follows:

Gini coefficient in countries that are part of the European bloc, such as Slovenia, Denmark, Norway, Sweden, Czech Republic, is in the range from 0.2 to 0.3.This does not mean that the incomes of all the inhabitants of these countries are at the same level, but rather the fact that national wealth is distributed evenly.In every country there are higher, lower and middle strata of society, has its own specific forms of property and income, but there is clearly and obviously the poor rich people.

In those countries whose economies are well developed, such as Japan, UK, Germany, Spain, France and Portugal, the Gini coefficient is an average of about 0.35.The main sources of accumulation of funds are companies and organizations working in the banking and industrial sector.In society, there are two main groups: the more affluent and one that is more susceptible to economic shocks and financial crises.

Countries whose Gini index is high (from 0.45 to 0.55 and 0.6 times superior), including Russia, the United States, Venezuela, Brazil, Guatemala, Namibia, El Salvador, Bolivia, Haiti and Zimbabwe.It would seem, how can such large countries like the US and Russia in the same list with African and Latin American countries?Most likely, the answer lies in the methods of eradication of inequalities that each state carries out its own way and get relevant results.

As one of the ways to improve the uniformity of the distribution of income is considered to be the provision of state support for education, welfare and health.This makes it possible for people with low incomes to get an education, to preserve the health and be more confident about their future.

following method to combat inequality implies changes in the taxation of citizens, in particular, the introduction of the progressive income tax rates.Fixed rate of taxation income, which, for example, exists in Russia, leads to the fact that the poor are getting poorer and the rich continue to increase his fortune.

Of course, you can use a combined approach, however, new, radically different ways of improving the income distribution of the world economy is not yet known.