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The Gini Coefficient

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Calculating the Gini Coefficient
The Gini Coefficient
Once a Lorenz curve is constructed, calculating the Gini coefficient is pretty straightforward. The Gini coefficient is equal to A/(A+B), where A and B are as labeled in the diagram above. (Sometimes the Gini coefficient is represented as a percentage or an index, in which case it would be equal to (A/(A+B))x100%.)

As stated in the Lorenz curve article, the straight line in the diagram represents perfect equality in a society, and Lorenz curves that are further away from that diagonal line represent higher levels of inequality. Therefore, larger Gini coefficients represent higher levels of inequality and smaller Gini coefficients represent lower levels of inequality (i.e. higher levels of equality).

In order to mathematically calculate the areas of regions A and B, it is generally necessary to use calculus to calculate the areas below the Lorenz curve and between the Lorenz curve and the diagonal line.

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