Economics is a science that incessantly uses various indices with the pure purpose of measuring the behavior of the social and economic environment.
The statesman and ideologist Corrado Gini, in 1912, developed a method that made it possible to measure the level of Social inequality from a country. At that time and at first this method was applied to the health sector, little by little it progressed being applied in diverse environments such as chemistry, engineering, ecology and transportation, however, where it has reached greater importance is in the distribution of citizens' income.
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Today the Gini indicator It is one of the most valued indicators in terms of the economic and social environment and the lists published annually serve as a reference for a wide variety of studies and research.
In this article you will find:
What is it and how is it applied?
The Gini index, also know as Gini coefficient, It is a measure used to calculate the existing income inequality among the citizens of a country.
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According to the logic of the method, a scale that goes from 0 to 1 is applied, where:
- Zero (0) corresponds to the highest indicator of equality, where everyone has the same income.
- One (1) corresponds to the highest inequality indicator, where a citizen has all the income.
See statistics by country here: https://datos.bancomundial.org/indicador/SI.POV.GINI
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How does the Gini indicator method work?
The Gini method It is essentially based on a graphical representation known as the Lorenz Curve, this representation allows to graphically visualize the income of the people in a country.
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These are two variables:
- Percentages of population.
- Percentages of income.
Each one of them located on one of the axes of the map and the curve obtained shows the evolution of income.
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Important considerations
It is important to be clear that income should be placed on the vertical axis (ordinate axis) and on the horizontal axis (abscissa axis) should be located the various population groups, of the country in study. The last mentioned ones are arranged in order according to income level (from left to right, starting with those with the lowest income and ending with those with the highest income on the right).
If the curve obtained is straight, similar to the hypotenuse of an equilateral, it is interpreted as an index of absolute equality in the country under study. If the case is the opposite and a high inequality index is assumed, the curve obtained must be equal to the legs of an equilateral.
In addition to this graphical complement to the Gini index, there are concepts closely related to this indicator and that are important to understand in order to achieve a broader and more complete understanding of the method. These are:
Wealth distribution:
Worldwide, all countries have a level of wealth. The term inequality refers to the imbalance in the distribution of said wealth among its inhabitants.
Stratifications, hierarchies and social classification are characteristic of those societies with greater inequality.
Equal income:
Income refers to the income to which people have access in a given period. It is measured monetarily, by possessions, whether they are goods or services.
Equality in income is subject to the social and economic policies that are implemented in the country.
Poverty indicators:
Poverty refers to the condition of some people who do not have access to the minimum levels of well-being, because they do not have the necessary financial means to do so.
In certain parts of the world, to obtain an overview of poverty levels, the following are used indicators: Human development index, poverty line and the best known and most applied, income per capita.
