what are gini coefficients?

Doug Henwood dhenwood at panix.com
Fri Aug 18 12:50:15 PDT 2000

Charles Brown wrote:

>The thing that struck me about the Gini curves on the LBO website
>example is that they were so close together. Then there is this
>discussion around here that Pareto or somebody and others have
>demonstrated that the income distribution/dispersion/inequality is
>and has been very close over a the long run ( or is that a joke ?).
>It would seem like the interesting thing about income distribution
>is that it doesn't change, suggesting none other than a scientific
>law at work.

There have been fairly substantial changes in U.S. ginis over time - see the chart at <http://www.panix.com/~dhenwood/IncPov98.html> for a long history. Or, in 1974, the richest 20% of families had an income 9.7 times that of the poorest 20%; 1998, it was 13.8 times. If the poorest 20% had the same share of income in 1998 that it did in 1974, they'd be about 25% richer. I guess it all depends on perspective: even at its most egalitarian, U.S. income distribution was highly unequal - it's just gotten more so.

Cross-country comparisons are even more dramatic. After taxes and transfers, someone at the 80th percentile of the U.S. income distrib has 9 times the income of someone at the 20th (the numbers in the last paragraph are pre-tax and post-transfer). In Sweden, the 80/20 ratio is 4. Pretax, pre-transfer differences are also wide; in the U.S., someone at the 80th percentile of the wage distribution has an income 21 times that of someone at the 20th; in Germany, it's 12 times.

You can get all highminded and say the differences are fairly minor, but a few thousand bucks makes a big difference to a bottom quintile whose average is under $10,000.


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