Reply #55: It's a measure of distributive inequality.

[TahitiNut]

Definition: The Gini coefficient is a number between zero and one that is a measure of inequality. An example is the concentration of suppliers in a market or industry.

The Gini coefficient is the ratio of the area under the Lorenz curve to the area under the diagonal on a graph of the Lorenz curve, which is 5000 if both axes have percentage units. The meaning of the Gini coefficient: if the suppliers in a market have near-equal market share, the Gini coefficient is near zero. If most of the suppliers have very low market share but there exist one or a few supplies providing most of the market share then the Gini coefficient is near one.

In labor economics, inequality of the wage distribution can be discussed in terms of a Gini coefficient, where the wages of subgroups are fractions of the total wage bill.

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The Gini Coefficient (aka Gini Index and Gini Ratio) is a number between 0 (zero) and 1 (sometimes expressed as between 0 and 100) that indicates the degree of inequality in a distribution.

For the purposes of this thread, we're talking about the distribution of Family Income. If the Gini Index were 0, it would indicate perfectly equal income distribution, with every family having equal incomes. If the Gini Index were 1, it would indicate that one family receives ALL the income and all other families receive none.

When we see a Gini Index of 0.25 for Japan and a Gini Index of 0.50 for Mexico, we can conclude that there is double the inequity in distribution of income among the families of Mexico as there is in Japan.

The fact that "lower is better" (at least in the ranges we're looking at) should be culturally obvious in the graph I presented, since the Gini Index for "White" families is lower than for "Black" or "Hispanic" families.