1. The Gini Index Paige Stillwell and Tanya Picinich

2. The Lorenz Curve Shows the share of total income of the population from 0 to t where t is the rank of a household’s income as a percentage of the total populationShows the share of total income of the population from 0 to t where t is the rank of a household’s income as a percentage of the total population

3. Perfect Income Equality: Utopia 20% of the population makes 20% of the income and so on20% of the population makes 20% of the income and so on Lorenz curve has the equation y=x

4. Complete Inequality One person makes all the money. Everyone else makes nothingOne person makes all the money. Everyone else makes nothing

5. Gini Index Gives information about the income inequality of a country in one numberGives information about the income inequality of a country in one number Ranges from 0 to 1Ranges from 0 to 1 Calculated as the area between perfect equality (y=x) and the Lorenz curveCalculated as the area between perfect equality (y=x) and the Lorenz curve

6. The Gini Index for perfect equality is 0 The Gini Index for total inequality is 1

7. Reality: How the Gini Index is Calculated In real life we use data points to find the Gini indexIn real life we use data points to find the Gini index We use income quintiles which are made available by the U.S. Census BureauWe use income quintiles which are made available by the U.S. Census Bureau United States Income Quintiles 2007 Income Quintiles Lower 5th Second 5th Middle 5th Fourth 5th Highest 5 th % of total income 55.325.911.34.43.1

8. The United States Gini Index 2007 The United States Gini Index for 2007 is quoted by the U.S. Census Bureau as G(t)=.463The United States Gini Index for 2007 is quoted by the U.S. Census Bureau as G(t)=.463 This value may vary depending on what is considered as income and whether individuals or households are examinedThis value may vary depending on what is considered as income and whether individuals or households are examined

9. Potential Issues The Gini Index glosses over many detailsThe Gini Index glosses over many details Gives a more accurate picture of the relationship between the upper class and middle class than the relationship between the upper class and lower classGives a more accurate picture of the relationship between the upper class and middle class than the relationship between the upper class and lower class Does not reflect unreported income and money received through welfare systemsDoes not reflect unreported income and money received through welfare systems

10. Why is the Gini Index so important? Compiles information about income inequality into 1 numberCompiles information about income inequality into 1 number Allows for comparisons with other countriesAllows for comparisons with other countries Shows how income inequality changes over timeShows how income inequality changes over time This information has great social, political, and economic implicationsThis information has great social, political, and economic implications

11. Comparisons Across Countries The Gini index for the entire world = 56 - 66The Gini index for the entire world = 56 - 66 Tolerance for inequality of income varies between countriesTolerance for inequality of income varies between countries –US = higher tolerance for income inequality –European countries = lower tolerance for income inequality –Underdeveloped countries have a higher income inequality Countries With Low Gini Indices Sweden23 Denmark24 Finland26 Canada32.1 Countries With High Gini Indices Namibia70.7 Lesotho63.2 Central African Republic 61.3 Haiti59.2 Bolivia59.2 Brazil56.7

12. United States Over Time