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- 1. Regional & MetropolitanPlanning Dr. Mohammed Firoz . C Architect and Urbanist Department of Architecture and Planning National Institute of Technology Calicut, India Lecture 12
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- 3. Concept of GINICoefficient
- 4. Gini Coefficients What isGini coefficient? • Gini coefficient also called the Gini index or Gini ratio, is a measure of statistical dispersion intended to represent the income inequality or wealth Inequality within a nation /Region or any other group of people. • It can also be used to compare income or wealth over a period of time • It was developed by the Italian statistician and sociologist corrado Gini and published in his 1912 paper Variability and Mutability • The Gini coefficient is a single number aimed at measuring the degree of inequality in a distribution. • It is most often used in economics to measure how far a country's/regions wealth or income distribution deviates from a totally equal distribution.
- 5. Gini Coefficients What isGini coefficient? • The Gini coefficient is usually defined mathematically based on the Lorenz Curve which plots cumulative share of Income in % on Y axis and % House hold by income distribution on X axis • Its value varies anywhere from ‘zero’ to ‘One’, zero indicating perfect equality and one indicating the perfect inequality. • A Gini figure below 0.40 is generally considered to be within tolerable limits by economic experts. • Two popular ways to measure Gini Coefficient are those based on pre-tax (or market) income and disposable income. • Different scales like -Per capita household scale, OECD scale, Square root scale etc. are used depending on the case. There exist no consensus globally in the usage of scale
- 6. Gini Coefficients Region/Country 1: •Household A, Income =100000 Rs, Household B, Income = 20,000/- • Average Income = (100000+20000) =60000/- Region/Country 2: • Household A, Income =65000 Rs, Household B, Income = 55000/Rs - • Average Income = (65000+55000) =60000/-Rs Both Region has an average income of 60,000/- But here, simple average do not measure any disparities between the households. Hence Gini Coefficient measures the disparities more accurately and is a better concept to assess inequality
- 7. Gini Coefficients Lorenz Curve •The line at 45 degrees represents perfect equality of incomes. • The Gini coefficient is the ratio of the area that lies between the line of equality and the Lorenz curve (marked A in the diagram) over the total area under the line of equality (marked A and B in the diagram); i.e., G = A/(A + B). • The closer the Lorenz curve is to the line of equality, the smaller area A is. And the Gini coefficient will be low. • If there is a high degree of inequality, then area A will be a bigger percentage of the total area. • A rise in the Gini coefficient shows a rise in inequality – it shows the Lorenz curve is further away from the line of equality.
- 8. Gini Coefficients Interpretations : •Curve 1 : 90% of the population holds 55% of the total income. That means the richest 10% of income earners gain 45% of total income. • 20 % of population only Holds 5 % of Income • Curve 2: 90% of the population holds 75% of the total income. That means the richest 10% of income earners gain only 25% of total income • 20 % of population Holds 9 % of Income • Line 3 : Line of perfect equality - everyone had the same Income distribution - An idealist case ( Line of 45 degree) • 20% of the population would gain 20% of the total income. • 60% of the population would get 60% of the income.
- 9. Gini Coefficients Why isthe coefficient significant? • A general rise in Gini Coefficient indicates that government policies are not inclusive and may be benefiting the rich as much as (or even more than) the poor. • It is important that rich-poor divide is kept in check to ensure that a larger section of society reaps benefits from economic growth. • A higher Gini Coefficient also could mean temptation for an incumbent government to splurge more on welfare schemes and tax the rich more ????? ( Idealistically…but do not happen practically) . • In India, the Gini Index has crossed 0.5 recently which is not a good sign. The Gini has been increasing over a period of time which is not good
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- 11. Gini Coefficients Video explainingConcept of GINI Coefficient and Lorenz Curve
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- 13. Gini Coefficients • GiniCoefficient in India • A study in India shows very large increases in inequality since 1990. Its net Gini index of inequality (based on income net of taxes and transfers) rose from 45.18 in 1990 to 51.36 in 2013. • Only two countries in the Asia- Pacific region—Papua New Guinea and China—are more unequal. • The net Gini coefficient in India is much higher than the average -43.69 for Latin America ( expected as one of the most unequal regions in the world)
- 14. Gini Coefficients • Accordingto Credit Suisse in their 2018 Global Wealth Report The richest 10% of Indians own 77.4% of the country’s wealth,. The bottom 60%, the majority of the population, own 4.7%. The richest 1% own 51.5% • Whose development are we talking about? Is it development for the top 1%, or for the top 10%, or the poorest 60%? • While wealth has been rising in India, not everyone has shared in this growth. • 91% of the adult population has wealth below $10,000. At the other extreme, a small fraction of the population (0.6% of adults) has a net worth over $100,000.
- 15. Gini Coefficients • Disposableincome, also known as disposable personal income (DPI), is the amount of money that households have available for spending and saving after Income tax have been accounted for. • Disposable personal income is often monitored as one of the many key economic indicators used to gauge the overall state of the economy
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- 21. Imbalances- Kerala –Other- An Ideal State ?
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- 26. Gini Coefficients Based on2011-12 data, Kerala topped the list with a Gini coefficient of 0.38. Karnataka 0.36, e Tamil Nadu was fourth with 0.33. All three were worse off than the national average of 0.32 Better percieved states, GINI Is worse
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- 31. ADD THESE ALSOIN NEXT SEMESTER • https://economictimes.indiatimes.com/blogs/et- commentary/heres-how-indias-widening-income- distribution-can-be-redressed/ • https://www.thehindubusinessline.com/opinion/books/the -many-hues-of-inequality-in-india/article28235613.ece • https://www.thehindubusinessline.com/opinion/books/the -many-hues-of-inequality-in-india/article28235613.ece • https://www.customwritingservice.org/an-analysis-of-the- causes-and-effects-of-income-inequality-in-india/ • https://www.livemint.com/Money/HJkSWsigdz6Xvkg8wpr6 jK/Where-are-you-in-Indias-wealth-distribution.html