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Gini coefficient: Definition: This is the most commonly used measure of inequality. The coefficient varies between 0, which reflects complete equality and 1, which indicates complete inequality (one person has all the income or consumption, all others have none). Graphically, the Gini coefficient can be easily represented by the area between the Lorenz curve and the line of equality. Significance : On the figure above, the Lorenz curve maps the cumulative income share on the vertical axis against the distribution of the population on the horizontal axis. In this example, 40 percent of the population obtains around 20 percent of total income. If each individual had the same income, or total equality, the income distribution curve would be the straight line in the graph – the line of total equality. Cite/Example: Professor Ross’s Lecture 16 “Inequality”. Example: The Gini coefficient is calculated as the area A divided by the sum of areas A and B. If income is distributed completely equally, then the Lorenz curve and the line of total equality are merged and

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This note was uploaded on 11/17/2011 for the course IDS 100B taught by Professor Ross during the Spring '11 term at UCLA.

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1 - Copy - Copy (8) - Gini coefficient Definition This is...

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