# What is Gini Coefficient?

## Meaning of Gini coefficient

The Gini coefficient, created by the Italian mathematician Conrado Gini, is a **statistical instrument to measure the inequality** of a distribution.

Therefore, it is used to **measure the difference between the income** of those who have more and those who have less. The central objective is to analyze the concentration of income to current inequalities.

The Gini coefficient is defined by a ratio with values between 0 and 1: the numerator is the area between the Lorenz distribution curve and the uniform distribution line; The denominator is the area under the uniform distribution line. The Gini index is the Gini coefficient expressed as a percentage, and is equal to the Gini coefficient multiplied by 100.

As mentioned in the first paragraph, this coefficient is widely used to measure **income concentration** and inequality.

When the index is equal to 0, it corresponds to a perfect distribution **equality , that is, everyone has the same income, for example.**

When the index is equal to 1, it means that the distribution **inequality** is perfect, that is, all income is concentrated in the hands of one person and all other people have 0 income.

But, in general, **what is the Gini coefficient for? **We already know that it is an important measure for income concentration.

The concentration of income is an important measure to understand the **degrees of inequality** in a country, a region.

Therefore, the greater the concentration of income, the greater the inequality. This also increases the difficulty of taking action to reduce inequalities.

Income inequality is directly related to **social inequalities** , so the coefficient is important in determining poverty levels.

Over time, monitoring a country’s Gini coefficient, for example, indicates whether efforts have been made to reduce inequality, whether it is maintained or whether it has increased.

Another question to ask yourself is: **how much lower is the Gini coefficient, the greater is the wealth of the country? **Not necessarily, some countries may have a good Gini coefficient that indicates that the few existing resources in the country are equally distributed.

The conclusions about the **social inequalities** related to the coefficient need more aspects to really produce a reliable analysis of the reality studied.

Therefore, before drawing conclusions about the results of the Gini coefficient, it is necessary to know the reality that it evaluates.