What does the GINI coefficient measure?(1 point)
Responses
gender disparities
gender disparities
workforce participation rates
workforce participation rates
income inequality
income inequality
racial bias
income inequality
The GINI coefficient measures income inequality.
The GINI coefficient is a measure of income inequality within a population. It quantifies the extent to which the distribution of income deviates from a perfectly equal distribution. A value of 0 indicates perfect equality, where every individual has the same income, while a value of 1 represents perfect inequality, where a single individual has all the income and others have none.
To calculate the GINI coefficient, you typically need income data for each individual in the population. Here are the steps to determine the GINI coefficient:
1. First, arrange the individuals in the population in ascending order based on their income, from lowest to highest.
2. Next, create a Lorenz curve, which is a graphical representation of the income distribution. On the x-axis, plot the cumulative percentage of the population, and on the y-axis, plot the cumulative percentage of total income.
3. Then, plot the line of perfect equality, which represents a situation where income is equally distributed. This line would connect the points (0,0) and (100,100) on the Lorenz curve.
4. Calculate the area between the Lorenz curve and the line of perfect equality. This area represents income inequality.
5. Finally, compute the GINI coefficient by dividing the area of income inequality by the total area under the line of perfect equality.
The resulting GINI coefficient ranges from 0 to 1, where higher values indicate greater income inequality.