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Unformatted text preview: Distribution of income How can we measure income distribution? The gini coefficient is the ratio of the area between the Lorenz curve and the diagonal to the total area beneath the diagonal. The Gini coefficient is a measure of statistical dispersion most prominently used as a measure of inequality of income distribution or inequality of wealth distribution. It is defined as a ratio with values between 0 and 1: the numerator is the area between the Lorenz curve of the distribution and the uniform distribution line; the denominator is the area under the uniform distribution line. Define a perfectly equal and unequal income distribution using the Lorenz curve Where G=0 we have perfect equality; where G=1 we have perfect inequality. a low Gini coefficient indicates more equal income or wealth distribution, while a high Gini coefficient indicates more unequal distribution. 0 corresponds to perfect equality (everyone having exactly the same income) and 1 corresponds to perfect inequality (where one person has all the income, while everyone else has zero...
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This note was uploaded on 03/31/2010 for the course ECONOMICS 322 taught by Professor H during the Spring '08 term at Kadir Has Üniversitesi.
- Spring '08