Reply #5: Very interesting. Based on the Gini coefficient [View All]

[stevenleser]

http://en.wikipedia.org/wiki/Gini_coefficient



The Gini coefficient is a measure of the inequality of a distribution, a value of 0 expressing total equality and a value of 1 maximal inequality. It has found application in the study of inequalities in disciplines as diverse as sociology, economics, health science, ecology, chemistry, engineering and agriculture.<3>

It is commonly used as a measure of inequality of income or wealth.<4> Worldwide, Gini coefficients for income range from approximately 0.23 (Sweden) to 0.70 (Namibia) although not every country has been assessed.




The Gini coefficient is usually defined mathematically based on the Lorenz curve, which plots the proportion of the total income of the population (y axis) that is cumulatively earned by the bottom x% of the population (see diagram). The line at 45 degrees thus represents perfect equality of incomes. The Gini coefficient can then be thought of as 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 Gini coefficient can range from 0 to 1; it is sometimes expressed as a percentage ranging between 0 and 100. More specifically, the upper bound of the Gini coefficient equals 1 only in populations of infinite size. In a population of size N, the upper bound is equal to 1 − 2 / (N + 1).

A low Gini coefficient indicates a more equal distribution, with 0 corresponding to complete equality, while higher Gini coefficients indicate more unequal distribution, with 1 corresponding to complete inequality. To be validly computed, no negative goods can be distributed. Thus, if the Gini coefficient is being used to describe household income inequality, then no household can have a negative income. When used as a measure of income inequality, the most unequal society will be one in which a single person receives 100% of the total income and the remaining people receive none (G=1); and the most equal society will be one in which every person receives the same income (G=0).

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My integral calculus is a little rusty. Going to take me a little while to wrap my head around what (as in how significant) a difference between .4 and .5 means.