Measurement of income distribution

Income distribution Income distribution refers to the way the nation’s “income cake” is divided or shared between individuals and income units making up the population.

Equality in Income distribution One of the goals of the Australian government is to make Income distribution as equal as possible given the workings of a market economy. This means everybody should have an income to maintain the minimum standards of living.

Measuring equality of Income Economists use statistical models to measure income distribution in an economy. One such model is a Lorenz diagram and the Gini coefficient which shows how evenly income or wealth is distributed between individuals.

Greater Inequality

GINI Coefficient Gini coefficient is a measure of the degree of inequality in the distribution of a nation’s income or wealth. It represents the area between the actual Lorenz curve and the line of total equality. = 1 = 0

GINI Coefficient Gini coefficient is a number between 0.00 and The bigger the area, the closer the Gini coefficient is to its maximum value of 1 and an economy has a very high inequality of income distribution. A value close to 0 in an economy has a very low inequality of income distribution. – i.e very equitable

GINI Coefficient on a world basis